This is a question that often is not asked when starting a business. But actually, it should be. The way you approach your business should be directly related to this question.
Are you a Small Lifestyle Business?
Do you plan to run your business so that it can support the lifestyle that you and your family have grown accustomed to? If so, then you will probably have 3-12 employees and gross $500-$1.5MM. Most likely this is not a company positioned to be purchased.
Are you running a Performance Business?
Does your small business have 20-50 employees and gross up to $6MM? If so, then your business is more likely to be considered by a purchaser and you will need to run it as such. You will probably need a Board of Directors or Advisors so that a purchaser can see you have experts advising you. Also you may want to sell shares of your company to non-family members so a buyer sees that others have invested in this company.
So whether you considered this prior to starting your business or not, perhaps it is a thought today.
Here are two interesting statistics from BizBuySell.com:
- Restaurants sold in third quarter 2013 (377) were a 109% increase over the same quarter 2012.
- Total small businesses sold in third quarter 2013 (1,685) were a 42% increase over 2012.
According to the Small Business Administration, 2013 marked the third highest year of lending to date. If you do want to consider the possibility of selling your business it is important that you evaluate your needs properly. If this sale is to fund your retirement needs:
- The Bush-era tax cuts expired over a year ago. Therefore the tax increase on the highest earners (which will be you if you sell) is now 39.6%.
- Meet with a financial expert to help you calculate how much money you need to retire as a CoupleCEO.
Buyers are savvier than they were during the prerecession. They want to purchase well performing businesses:
- A company will be valued on average sales over the past three to four years. If your best sales numbers date back to prerecession, you might need to wait.
- A business broker suggests that your company should have at least one year of sustainable growth before going on the market.
Other things to consider:
- Do you, and possibly your management team; want to stay on after the sale? Often this is a request. Usually in this scenario, you are no longer the boss.
- Full transparency is the law. If you are selling company stock as part of the transaction, there are specific disclosure obligations under federal and state securities laws.
This is some general information for you to consider if selling a business has crossed your mind. If you are going to seriously consider this, it is important that you meet with the proper financial and legal experts to receive their advice.
We hope you found this helpful as you ponder all of the possibilities for your life and business as a CoupleCEO.