Mergers & Acquisitions Advisory

A Neumann & Associates, LLC

October 6, 2014

When is the Best Time to Sell My Business?

By Joseph Eneldas

selling-a-business-directly

At A Neumann & Associates, we get asked the question “When is the Best Time to Sell My Business?“ all the time.  The answer is tricky.  While there are “better” times than others, quite honestly there is no way to tell “the best” time to transfer out of a business.  With that said, there should be a methodical approach to the transfer by the business owner and there are indeed some guiding principles to be considered.

“We encourage our clients to take an objectives-driven point of view when contemplating an exit from the business,” says Achim Neumann, President. “It is vital to identify exactly what the ultimate goals are and then to see if a sale will meet those goals.”  Sounds simple, but sometimes this process can take years to properly execute.

Among many, some of the most commonly expressed goals of a sale include retirement, financial security, lifestyle change, taking care of employees, and enabling future growth of the company.  Each business is unique and the decision to sell is truly an individual one based upon very personal circumstances.  Neumann adds, “The key is for the business owner to acquire as much accurate information as possible and take steps to position the company for a proper transfer.  This will give the owner the best chance to maximize financial return and meet his/her stated goals when the time comes.”

With this in mind, let’s examine some of the essential steps in this process:

1.  Knowing the true value of the company.

If a business owner assumes that they know what the business is worth, he/she will be sadly mistaken.  Commonly used “rules of thumb” such as multiples of revenue, EBITDA and the likes are fine for cocktail parties but certainly not as the basis for a sale.  An independent and accredited fair-market valuation of the firm should be performed at least every 2 years.  This unbiased and multi-dimensional report will provide a thorough analysis of true worth as an ongoing concern.  Guessing is not an option.

2.  Knowing the true marketability of the company.

Through the valuation process, the business owner should be given a complete marketability analysis from an experienced Mergers & Acquisitions professional.  It is crucial for the business owner to understand exactly how the business will be received by the buying and financing communities.  Investors and banks will be looking at certain things and asking certain questions – the owner should know these in advance and be able to provide the correct answers.

3.  Understanding what drives value and marketability.

With the valuation and accompanying marketability analysis in hand, the next step is to identify the specific value drivers within the firm and enhance the attractiveness and worth accordingly.  In preparing the business for sale, it is essential to eliminate any perceived dependencies – on ownership, on a specific employee, or on a specific client.  Moreover, specific steps should be taken to improve vendor relationships, expand the client base, streamline fulfillment systems, and empower dedicated employees.

4.  Understanding the transfer process completely.

Finally, the business owner should be aware of (and completely comfortable with) the exact selling process including the owner’s role, the correct team to assemble, and how long the process takes.  If the above 3 steps have been taken, this transfer process will be evident and the owner empowered to tackle this unique proposition.  With a professional M&A team on his side and having taken the proper steps to position the company, the business owner will maximize the firm’s performance, ensure confidentiality, and execute an efficient sale.

“You can’t time the market – either on Wall Street or on Main Street,” says Neumann. “However, what small business owners can do is clearly define their goals and then put themselves in the best position possible to execute a sale.  If this is done properly, then the financial return from a transaction will be maximized and odds are the other objectives will be met as well.  This is the ideal scenario.”

There is no “best time to sell,” but there is a “best approach to selling,” and it is incumbent upon ownership to know this and utilize it.  Simple concept?  Yes.  Always done – and done properly? Not so much.

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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“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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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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