Mergers & Acquisitions Advisory

A Neumann & Associates, LLC

May 21, 2020

How to Maximize Sale Price When Selling Your Business

By Achim Neumann

business broker

The priority for any business owner when selling a business is obtaining the highest sale price and best deal terms. The factors that contribute to overall sale price are manifold, and being aware of all of them is essential. What follows are some insights into how to sell your business for the highest price and best terms garnered by our experienced Business Brokers over the years.

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Financial Review

To determine your initial asking price, you will first need to carry out a review of a minimum of three years of tax returns and generate an up-to-date profit and loss statement for the current year with comparison to the same period from the previous year.

In addition to tax returns, buyers will want to learn the true cash flow the owner derives from the business. To do this, a seller’s discretionary cash flow (SDCF) will need to be calculated for the past three years, the current year and projected out for three years. This figure will include the owner’s salary as well as the perks and benefits that the owner receives from the business (e.g. company car, health insurance, and retirement plan). It also includes discretionary expenses which are not required for the day-to-day running of the business (e.g. travel, entertainment, country club memberships and other perks).

A larger SDFC will allow a seller to ask for a higher sale price, so calculating this figure accurately is important going into sale negotiations.

The Right Business Broker And M&A Advisor

Hiring a business brokerage or Merger & Acquisitions firm that has experience in selling businesses in your industry is essential. Their expertise will allow them to market your business correctly. This will ultimately result in a larger pool of potential buyers which will hopefully help to create a bidding war to drive up the price.

Make sure to hire a firm whose fee structure is based on a percentage of commission payable when the sale goes through. This will give them added incentive to go the extra mile and hold out for the highest possible price.

Asking Price

A well-positioned initial asking price is an integral part of maximizing the sale of any company. If the price is too low, you run the risk of having to settle for less at a later stage in the negotiations, in essence “leaving money on the table”. If you price it too high, you may attract fewer potential buyers and run the risk of being low-balled, potentially compromising confidentiality in the process with an unreasonable number of buyer introductions. A Business Broker will be able to help you settle on a price that falls somewhere between these two extremes.

Confidential Marketing

The importance of keeping the sale of your business confidential cannot be overstated. If customers, vendors, banks, landlords and employees find out that change is afoot before the deal is done, they may get cold feet or become distracted.

An experienced Business Broker will have the proper buyer pre-qualification process in place, and the right contacts and know just how to advertise the business, selecting the right targets to market to so that potential buyers are found without news of the sale becomes common knowledge.

Do Not Close Off Your Options

Try to keep an open mind when it comes to buyers. Know that the best offers sometimes come from buyers who are not familiar with your market segment. As long as potential buyers are financially qualified and have the necessary skills to run your business, they can always learn the business aided by your supervision in the post-sale period.

Transparency & Communication

You should complete due diligence as quickly and efficiently as possible. Transparency is important to convince buyers of the profit-making potential of your business. Providing all the documentation at the first time of asking will give prospective buyers the confidence that everything is as it seems. Be available to respond to any questions about the business that a buyer may have. Only if a buyer is sure that everything is above board will they offer a price which is close to your initial asking price.

Negotiation Phase

It is important to remember that the proposal with the highest price is not always the best offer; the structure of the offer (deal terms) and the buyer competence are also important. Decide on your priorities for the negotiation stage as you examine the offers. Once you have relayed these priorities to your Business Broker, he/she can negotiate on your behalf to get the best price and terms.

Providing a Transition After The Sale

Typically, a deal asking price includes your advice and guidance after the sale goes through. Transition periods vary greatly and depend on the needs of the buyer. In some cases, your involvement will be minimal. In others, you will be required to introduce the new owner to customers, suppliers and staff.

About A Neumann & Associates, LLC

A Neumann & Associates, LLC is a professional mergers & acquisitions and business brokerage firm having assisted business owners and buyers in the business valuation and business transfer process through its affiliations for the past 30 years. With an A+ Better Business Bureau rating, the company has senior trusted professionals with a deep knowledge based in multiple field offices along the East Coast and has performed hundreds of business valuations in its history. The firm’s competitive transaction fees are based on successfully completing transactions. For more information, please contact A Neumann & Associates at 732-872-6777 or info@neumannassociates.com

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Client Testimonials

“Working with Marc and his company was a pleasure. What I thought was going to be a just another one of those pushy sales companies was just the opposite. Polite, knowledgeable, and a pleasure to talk to and deal with. Marc handled most of the interaction and he has one of the greatest demeanors. Again, it was a pleasure working with him and his firm.”

Douglas DiCeglio

“I recently completed an acquisition using A Neumann & Associates. Tony Valentino was very helpful and accessible during the entire process. They do a thorough job vetting both parties and got us to the finish line.”

Srini Mudambi

“Claus out of Florida helped us with the sale of our business. We had never done anything like this and him and his team walked us through the process from start to finish. We had some challenges through the process and Claus continued to show up even in the difficult conversations.”

Colby Harris, Co-Owner, Del Mar Designs

“Claus Madsen thoroughly helped us with selling our company. From the 1st introductory meeting explaining to us what was possible, to providing us with resources to assist with the sale. Claus was invaluable throughout the whole sales process. Claus was with us every step of the journey and always made himself available for any questions or issues that came up along the way. If you are interested in selling your business, I encourage you to reach out to Claus and the ANA team so that they can let you know what’s achievable. These guys will make it happen!”

Ron Harris, Co-Owner and Vice President, Del Mar Designs

“A Neumann & Associates is the only business broker I would use or consult with. They have assisted with 3 business sales over the past 15 years with me. They are honest and sincere and have always performed better than my expectations. They are the only one i would use for the sales of my businesses.”

James Belanger, Business Owner

“I wanted to take a second to commend the exemplary customer service from both you [Karin Neumann] and Mr. Valentino. It’s both a rarity in the industry, and very much appreciated.”

Andrew G., Investor

“We worked with Neumann & Associates to investigate the purchase of a research company in 2010 and found Achim to be capable, forthright and realistic. His depth of experience enabled us to fully understand our options, offering creative options that might enable the acquisition. While we didn’t acquire that particular company at that time, we know exactly who to call whenever we’re looking to buy or sell a business.”

Daniel Coates, Buyer

“Purchasing a business through this firm was a pleasure. Gary was very professional and transparent throughout the entire process. I look forward to working with A Neumann & Associates in the future.”

William Klemens, Buyer

“I utilized A. Neumann & Associates to assist in an M&A process. They are VERY thorough in using their time-tested process to calculate the value of investment opportunities, a process which provided a very detailed explanation for the value of the potential opportunity. Additionally, they also went above and beyond to extend other services including connecting with others who specialize in your industry and can assist with necessary steps including legal and accounting. Highly recommended!”

Edward Lane , Business Owner

“I recently contacted A. Neumann and Associates about getting a valuation of my business done. I spoke with Achim, who explained the process in detail. He had his colleague Gary come to my office in order to get a clear understanding of my business, and what I was hoping to accomplish. His patience in answering all my questions and his knowledge of the proper way to market my business gave me great confidence that this is the firm I will be using when the time comes for me to sell my business for max value. They gave me great insight into the steps I need to take now to get the best deal in the future. I highly recommend this firm to anybody who wants to sell now or down the road. They not only know their stuff, their actually just real nice guys.”

Robert Kardane, Business Owner
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Contact A Neumann & Associates, LLC

If you are considering selling your business, please contact us to learn more about our comprehensive service spectrum. Our experienced professionals will answer all your questions about selling a privately held business in complete confidentiality. Please fill out our contact form, or call us at 732-872-6777. We will contact you directly and will never identify ourselves to your employees.

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