If you own a business, you may have thought about the day you stop owning it. That’s a reality for every one of us, 100 percent. A good question to ask is, “When should I exit my business?” And when I do, if I don’t pass it on to my kids or create an ESOP program for my employees, how do I get the best price or figure the right price? This is a complex question for anyone who looks to sell a business or buy a business.
To enhance your business’s value, take close note of your value drivers. Profit is important when getting the most for your businesses but there is more to it than just profit.
Two businesses could both be making about the same amount of money. Imagine two companies hitting $5 million in revenues and netting $500,000 in owner benefit last year. But if one is tied to the owner and the other hardly involves the owner, or in one the owner takes six weeks of vacation a year while in the other, nobody takes vacations until someone gets sick, different factors make one more attractive. Someone would prefer the business where they can take six weeks of vacation and where the owner can leave the business, and it can still run and perform well.
It is valuable to think ahead of the time you actually go to sell a business. A lot of times, business owner tend wait until the last minute to reach out their business broker to sell a business.
Look up “why businesses don’t sell” on the internet and see this data in articles from LinkedIn, Forbes Magazine, Inc. Magazine, and more. Buyers will pay for a business if they can see the value and if you, as the owner, can demonstrate it. Sometimes it takes time to understand your value drivers and what’s important so you can affect and impact them.
It’s not just the profit itself. As mentioned before, two businesses can both make $500,000 in earnings before interest, tax, depreciation, etc., but it’s those intangibles that make it magical. Getting a valuation early on that not only tells you a number or a range of numbers but also gives you information about what drives value is empowering to business owners. It gives you a lot of ideas so you can decide whether to change things or not. Two things are reality: one is that you’re not going to keep running your business forever, and thinking early on makes a big difference.
The second is understanding what really drives value in the marketplace can make a world of difference. It’s not just about you; it’s also about your family. I’ve talked to many people and dealt with many families where the owner got sick, and the spouse had to take over, or the kids had to help out. Having a plan in place makes that easier.
On a good note, if you’re getting out when you’re ready and you’ve planned well, it makes for a wonderful retirement. You get the money you deserve, your employees keep their jobs, your customers continue to enjoy your products or services, and the overall economic value in the community you’ve established keeps providing tax benefits and other advantages. This is Brian Steph ens with the Legacy Venture Group. You can use code and get your free business seller guide. Reach us at Legacy Venture Group Business Brokers, and Business Valuation Advisors LVG.com. We’d love to hear from you, get your feedback, and look forward to chatting with you. Make great things happen.
Take care and thank you for paying attention to this.
Why Hire a Business Broker
As a business owner, you’ve likely pondered the day you’ll no longer own your business. This is a reality for all of us, and the key question to ask is, “When should I exit my business?” When the time comes, whether you’re passing it on to your kids, creating an ESOP program for your employees, or looking to sell, understanding how to get the best price is crucial.
The Importance of Value Drivers
Enhancing your business’s value involves understanding and optimizing value drivers. For instance, two businesses might both generate $5 million in revenue and $500,000 in owner benefit annually. However, if one business is heavily dependent on the owner while the other can operate independently of the owner, the latter is more attractive to potential buyers. Similarly, if one owner can take six weeks of vacation annually without issues, while the other can’t take time off without disrupting operations, the business with operational independence is more valuable.
Planning Ahead
Many business owners wait until the last minute to plan their exit. Ideally, you should start thinking about your exit strategy well in advance. When businesses go to market because the owner is ready, forced, or has to leave suddenly, the results can be dramatic. To understand this better, search for “why businesses don’t sell” online. Articles from LinkedIn, Forbes Magazine, Inc. Magazine, and others highlight this issue extensively.
Buyers are willing to pay a premium for businesses where they see clear value. As a business owner, demonstrating this value is key. Sometimes, it takes time to identify your value drivers and understand their importance. It’s not just about profit margins; it’s about the intangible factors that make your business appealing.
The Role of Business Valuation
Getting a business valuation early on provides more than just a number; it offers insight into what drives value. A comprehensive business valuation in Tampa can help you understand your strengths and areas for improvement. This information is empowering, giving you the tools to make informed decisions about changes you might want to implement.
Reality Check: You Won’t Run Your Business Forever
It’s essential to recognize that you won’t be running your business forever. Early planning can significantly impact the outcome. Understanding market value drivers is critical. It’s not only about you but also about your family. Many families face challenges when the owner becomes ill, and the spouse or children must take over. Having a solid plan in place can alleviate these issues.
Benefits of a Planned Exit
If you exit your business on your terms with a well-thought-out plan, it leads to a smoother transition and a better outcome. You’ll receive the money you deserve, your employees will keep their jobs, and your customers will continue to enjoy your products or services. Moreover, the economic value you’ve established in your community will continue to provide tax benefits and other advantages.
Why Hire a Business Broker?
Hiring a business broker, especially experienced Florida business brokers, can make a world of difference. A broker brings expertise, market knowledge, and negotiation skills that are invaluable during the sale process. They can help you understand “what’s my business worth” and guide you through the complexities of the transaction.
Expertise and Network
Business brokers have access to a broad network of potential buyers and industry contacts. They know how to market your business effectively and reach the right audience. This can be particularly beneficial in niche markets where finding the right buyer can be challenging.
Objectivity and Professionalism
A business broker provides an objective perspective, which is crucial during negotiations. Emotions can run high during the sale of a business, and having a professional intermediary can help ensure that decisions are made based on facts and market conditions rather than emotions.
Maximizing Value
Florida business brokers are skilled in identifying and highlighting the value drivers that make your business attractive to buyers. They can advise on improvements and strategies to maximize your business’s value before it goes to market. This preparation can lead to higher offers and a smoother sale process.
Navigating the Process
The process of selling a business involves many steps, from initial valuation to closing the deal. A broker can manage this process, ensuring that everything stays on track and deadlines are met. They can also help with due diligence, legal considerations, and other critical aspects of the sale.
Conclusion
Thinking about your business exit strategy early and understanding what drives value can significantly impact the outcome. Hiring a business broker, especially for business valuation in Tampa, provides the expertise and support needed to navigate the complex process of selling your business. By planning ahead and utilizing professional services, you can ensure a successful transition, maximize your business’s value, and achieve the best possible outcome for you, your family, and your community.
This is Brian Stephens with the Legacy Venture Group. For more insights and a free business seller guide, visit Legacy Venture Group for LVGAdvisors.com. We’d love to hear from you and look forward to helping you make great things happen. Thank you for your attention and consideration.
What are you looking to buy a business or sell a business in a number of different industries legacy venture group has had experience developed over the last 20 years. We have a sweetheart relationship with a lot of construction companies, including HVAC, electrical contractors, roofing companies, plumbing companies, refrigerant companies, etc we’ve also had a delight in getting to know many of our environmental related companies, energy, companies, and more. Our office is located in Florida so we serve people in Tampa, Brandon, FishHawk (Lithia, FL), Clearwater, Orlando, Naples, Florida, Venice, Florida, and much more. But we’ve also worked around the country. We close deals in Maryland, or for people in Virginia, Georgia, North Carolina, South Carolin, texas, and even California. Reach out. We’re here to help.
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