Any advice on selling a business / business brokers?

NA ^ | 02/09/2010 | NA

[Lloyd227]

Anyone here ever used a business broker to sell an existing, established business? After a 5 year path to building a successful online automotive performance & computer business, I'm thinking of selling the whole thing and retiring.

[Lloyd227]

Trouble is, although I'm no dummy and can read a contract, I've never been involved in the sale or purchase of an existing business and I'm not sure what bases to cover, whether to use a broker, etc.. I'm thinkin I should use a legit broker, but don't really want to just choose one from the yellow pages without any references.

Any advice at all is most appreciated

[Amadeo]

Don’t trust a business broker, if you use one. Don’t trust them at all. If you use one, get a contract, limit their time to sell your business, and move on if you are the least bit unhappy about the way they are using your financial information or handling the sale.

And especially, if they offer to “swap” a business with you, or get you involved in a limited partnership or any other “investment”, FIRE THEM AND RUN AS FAST AS YOU CAN!

[drdemars]

Business Broker for 15 years in California- now retired.
Seek a specialist in your type of business and it might be that now you can use the internet and sell it yourself.
You might want to get more than one gent by giving out open listings. Most brokers charge a fee of 10%. Have good profit and loss statement for three years too.

[bobbkatt]

I assume you will have a gain on the sale. In that case, you would want to sell the stock rather than the company’s assets. This will get you a capital gain which will be taxed at a beneficial rate. Of course, Obama has set his sights on changing this preferential rate on capital gains so you may not get the benefit.

Do you know how much the company is worth? you may need an appraisal. You will also need a good tax accountant and a lawyer. Good luck. This can be complicated.

[Lloyd227]

Thanks for the tips, I hope you don't mind entertaining a couple of questions:

• Is there any such thing as a certifying or licensing association for business brokers? i.e. some way to tell if they're at least being self policed as opposed to someone just released from prison last month?
• How would one go about locating a broker who specializes in my kind of business?  i.e.  do they list their specialty?
• I assume we can start with a solid non-disclosure agreement, but how "bound" by these is a broker really?    i.e. given the financial end of any small or private business, there are discussions which may be both necessary and intended "for this room only".   
• Regarding having 3 years of good P&L statements, no problems there but of course any small business has some level of discretionary expenses which should also be accounted for in the valuation of a business right?   or will those get left for another day and the valuation based entirely on what's shown on the P&L statement?
• Just how do you go about applying a realistic value to a business that's internet based?    I have + or - 100k in inventory, but there is really not much else in hard assets.  The value is nearly entirely the proven and ongoing sales, the list of some 7000 active customers, the value of the websites & domains, etc...    Is there any such thing as a rule of thumb in setting a value?

[not-alone]

I was a very successful business broker for many years . Unfortunately many people with only residential or commercial real estate experience think they can sell business , It is very different. Look for references, check their ads and how they would market your business. It is important they have a good inventory; about 70 % of my buyers called about a very different business than they bought. You must have trust with your broker so be careful before you sign a contract Please feel free to mail me, if I can be of help .

[Canedawg]

If you decide to consult an attorney (not a bad idea, imo) and dont know of any, call the Conn. Bar Association Referral service, describe your situation, and they can give you a referral from the list of attorneys they have on file.

here is their website:

http://www.ctbar.org/article/view/291

[drdemars]

A value rule of thumb is one years net plus fixtures and equipment. Also another value way would be 40% of one years gross.

[FTJM]

Know your P&L, EBITDA and industry multiples. A broker can market the business for you, or you can just get a lawyer for the transaction if you market it yourself. Brokers don’t add a lot of value unless they have a deep database of motivated investors.

[Lloyd227]

what's EBITDA stand for?

See? I warned you I hadn't done this before! :-)

[FTJM]

Earnings Before Interest, Taxes, Depreciation and Amortization.

The multiple for your business will be calculated on a three year average of either EBITDA (higher multiple) or on your gross revenue (lower multiple) based on industry standards and comps for your type of business.

You'll negotiate the multiple then prove up your EBITDA, with full disclosure.

[Lloyd227]

"Earnings Before Interest, Taxes, Depreciation and Amortization"

Thanks!