{"id":32,"date":"2017-06-23T16:21:00","date_gmt":"2017-06-23T16:21:00","guid":{"rendered":"https:\/\/www.biznessvirgins.com\/index.php\/2017\/06\/23\/selling-your-business-stop-leaving-money-on-the-table\/"},"modified":"2020-02-20T09:33:57","modified_gmt":"2020-02-20T09:33:57","slug":"selling-your-business-stop-leaving-money-on-the-table","status":"publish","type":"post","link":"https:\/\/www.biznessvirgins.com\/?p=32","title":{"rendered":"Selling Your Business? Stop Leaving Money on the Table"},"content":{"rendered":"<h2 style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #3863a0; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.5em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: 600; letter-spacing: normal; line-height: 1.3em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Key Highlights<\/h2>\n<ul style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; list-style: none; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">\n<li style=\"border: 0px; box-sizing: border-box; line-height: 1.5em; list-style-type: disc; margin: 0px 0px 0.75em 30px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\"><strong style=\"border: 0px; box-sizing: border-box; font-weight: 600; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\">Current market conditions are prime for selling a business<\/strong>. The market is experiencing high multiples due to plentiful dry powder held by private equity firms, record amounts of cash held by strategic corporate buyers, a low interest rate environment, and high prices for publicly-traded equities.<\/li>\n<li style=\"border: 0px; box-sizing: border-box; line-height: 1.5em; list-style-type: disc; margin: 0px 0px 0.75em 30px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\"><strong style=\"border: 0px; box-sizing: border-box; font-weight: 600; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\">The time it takes to sell generally ranges from five to twelve months<\/strong>. The determining factors around timing include the size of your business and the dynamic balance between buyers and sellers in the market.<\/li>\n<li style=\"border: 0px; box-sizing: border-box; line-height: 1.5em; list-style-type: disc; margin: 0px 0px 0.75em 30px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\"><strong style=\"border: 0px; box-sizing: border-box; font-weight: 600; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\">Valuations are more of an art than a science<\/strong>. The best business valuation methods typically involve cash-flow. Still, the three most commonly utilized valuation calculations are the discounted cash flow, market multiples, and asset valuation.<\/li>\n<li style=\"border: 0px; box-sizing: border-box; line-height: 1.5em; list-style-type: disc; margin: 0px 0px 0.75em 30px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\">The<span>&nbsp;<\/span><strong style=\"border: 0px; box-sizing: border-box; font-weight: 600; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\">best practices for maximizing shareholder value<\/strong><span>&nbsp;<\/span>include the following:\n<ul style=\"border: 0px; box-sizing: border-box; font-size: 1em; list-style: none; margin: 1em 0px 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\">\n<li style=\"border: 0px; box-sizing: border-box; line-height: 1.5em; list-style-type: circle; margin: 0px 0px 0.75em 30px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\"><strong style=\"border: 0px; box-sizing: border-box; font-weight: 600; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\">Make sure the business can thrive without you<\/strong>. You need a management team or key employees that can continue to drive cash flow, especially if you plan to exit the business or will have limited involvement in day-to-day operations. You should also broaden your customer base so that the business is not at risk if a couple key customers leave post-sale.<\/li>\n<li style=\"border: 0px; box-sizing: border-box; line-height: 1.5em; list-style-type: circle; margin: 0px 0px 0.75em 30px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\"><strong style=\"border: 0px; box-sizing: border-box; font-weight: 600; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\">Learn the dynamics driving acquisitions in your industry<\/strong>. Many business owners spend their time focused on keeping the business running instead of devoting energy to planning for its sale. Stay apprised of the motivations for financial and strategic buyers in your industry, as this can help you negotiate a higher exit value.<\/li>\n<li style=\"border: 0px; box-sizing: border-box; line-height: 1.5em; list-style-type: circle; margin: 0px 0px 0.75em 30px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\"><strong style=\"border: 0px; box-sizing: border-box; font-weight: 600; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\">Hire the right advisors<\/strong>. Don\u2019t do it alone. An experienced M&amp;A advisor can market your company to a larger group of potential buyers than you can access on your own. Early engagement of an independent valuation specialist can provide a market check on valuation and allow you to incorporate value drivers into your pre-sale planning.<\/li>\n<li style=\"border: 0px; box-sizing: border-box; line-height: 1.5em; list-style-type: circle; margin: 0px 0px 0.75em 30px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\"><strong style=\"border: 0px; box-sizing: border-box; font-weight: 600; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\">Examine and adjust operational efficiencies strategically.<\/strong><span>&nbsp;<\/span>If necessary, it could be worth adopting efficient operating procedures before the sale. This may involve investments in new equipment or technology or changes in staffing.<\/li>\n<li style=\"border: 0px; box-sizing: border-box; line-height: 1.5em; list-style-type: circle; margin: 0px 0px 0px 30px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\"><strong style=\"border: 0px; box-sizing: border-box; font-weight: 600; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\">Factor tax considerations into sale decisions.<\/strong><span>&nbsp;<\/span>Decisions around how to sell your business (merger, sale of stock, sale of assets) should consider tax implications carefully. It is also important to anticipate changes in tax law.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2 style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #3863a0; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.5em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: 600; letter-spacing: normal; line-height: 1.3em; margin: 2em 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Investing in the Sale<\/h2>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">For many business owners, their business represents the culmination of their life\u2019s work and a primary source of wealth. The reasons leading one to sell a business can vary\u2014perhaps a competitor has presented you with an unsolicited, lucrative offer. Or, perhaps you are simply ready to retire. Regardless of your motivation, the sale process can prove to be complex, with considerations including the right time to sell, whether or not to employ advisors, which business valuation method to use, and how to maximize the valuation. Therefore, when thinking about how to sell a business, you will want to maximize the value through a combination of planning and timing. Building a solid exit plan can take several years, and business owners ideally should start planning for a sale 3-5 years before they wish to transition out. You\u2019ve invested in growing your business. When it comes time to sell your business, you must do the same.<\/div>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">The following analysis will help you understand the current acquisition market environment, how long it takes to sell businesses (small and large), other major considerations during the sale, how an accurate price is determined, and how to maximize acquisition value.<\/div>\n<h2 style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #3863a0; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.5em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: 600; letter-spacing: normal; line-height: 1.3em; margin: 2em 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Current Market Conditions for Selling a Business<\/h2>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Currently, with acquisition multiples at a record high, market conditions are optimal for selling a business. According to<span>&nbsp;<\/span><a href=\"https:\/\/pitchbook.com\/news\/reports\/1q-2017-us-pe-breakdown\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\">PitchBook<\/a>, the median EV\/EBITDA multiple hit 10.8x in 1Q 2017, a significant difference from the 8.1x multiple in 2010.<\/div>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\"><img decoding=\"async\" alt=\"Chart 1: US M&amp;A (Including Buyouts) Transaction Multiples\" src=\"https:\/\/uploads.toptal.io\/blog\/image\/123137\/toptal-blog-image-1495554964829-2a0edbfaadda47b5d04bdd606296fd4b.png\" style=\"border: 0px; box-sizing: border-box; display: block; margin: 0px auto 7px; max-width: 100%; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline; width: 860px;\" \/><\/div>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">The following factors have converged to create a robust market for acquisitions with high acquisition multiples:<\/div>\n<h3 style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #3863a0; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.3em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: 600; letter-spacing: normal; line-height: 1.3em; margin: 2em 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Record \u201cDry Powder\u201d Held by Private Equity Firms<\/h3>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Research company<span>&nbsp;<\/span><a href=\"https:\/\/www.preqin.com\/docs\/quarterly\/pe\/Preqin-Quarterly-Private-Equity-Update-Q1-2017.pdf\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\">Preqin<\/a><span>&nbsp;<\/span>reports<span>&nbsp;<\/span><a href=\"http:\/\/www.investopedia.com\/ask\/answers\/08\/dry-powder.asp\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\">dry powder<\/a><span>&nbsp;<\/span>for private equity buyout funds of $530 billion at the end of 1Q2017, a significant increase from the recent low of approximately $350 billion at the end of 2012. Further, new fundraising by private equity fund managers<span>&nbsp;<\/span><a href=\"https:\/\/www.bloomberg.com\/gadfly\/articles\/2017-03-08\/private-equity-s-dry-powder-mountain-can-be-conquered\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\">shows no signs of slowing<\/a>. In the early part of 2017, Apollo was seeking $20 billion for a new fund, and KKR had raised $13.9 billion for its new fund.<\/div>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\"><img decoding=\"async\" alt=\"how to sell a business\" src=\"https:\/\/uploads.toptal.io\/blog\/image\/123136\/toptal-blog-image-1495549535831-f72c1fcebdf37edbd1c7a1e72b1c3881.png\" style=\"border: 0px; box-sizing: border-box; display: block; margin: 0px auto 7px; max-width: 100%; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline; width: 860px;\" title=\"how to sell a business\" \/><\/div>\n<h3 style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #3863a0; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.3em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: 600; letter-spacing: normal; line-height: 1.3em; margin: 2em 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Strategic Corporate Buyers are Holding Record Amounts of Cash<\/h3>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">According to<span>&nbsp;<\/span><a href=\"https:\/\/insight.factset.com\/hubfs\/Cash%20and%20Investment%20Quarterly\/Cash%20and%20Investment%20Quarterly%20Q3%202016_12.21.16_v2.pdf\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\">Factset<\/a>, US corporations held $1.54 trillion in cash reserves as of the end of 3Q2016, the highest total in at least ten years, and a dramatic increase from the $700+ billion figure reported in 2007. Of this, much is held overseas, and if repatriated, a portion may be used for acquisitions.<\/div>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">For a strategic buyer, acquisitions can deploy cash reserves and generate returns in excess of corporate treasury bank accounts and investments. Corporations also seek acquisitions that create operating efficiencies or bolster their position in consolidating industries. Consequently, strategic buyers often<span>&nbsp;<\/span><a href=\"http:\/\/digitalcommons.pepperdine.edu\/cgi\/viewcontent.cgi?article=1009&amp;context=gsbm_pcm_pcmr\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\">pay a premium for acquisitions<\/a><span>&nbsp;<\/span>compared to financial buyers such as private equity firms.<\/div>\n<h3 style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #3863a0; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.3em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: 600; letter-spacing: normal; line-height: 1.3em; margin: 2em 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Low Interest Rate Environment<\/h3>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Those interested in selling a business benefit from low interest rates, as they directly affect acquisition prices. Duff &amp; Phelps, which publishes a widely-used<span>&nbsp;<\/span><a href=\"http:\/\/www.duffandphelps.com\/assets\/pdfs\/publications\/valuation\/coc\/us-normalized-risk-free-rate-nov15-16.pdf\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\">study of the cost of equity capital<\/a>, incorporates the ten-year trailing rate on the 20-year Treasury bond in its benchmark figure. The 3.5% figure reflects the low yields of the last ten years. Duff &amp; Phelps\u2019<span>&nbsp;<\/span><a href=\"http:\/\/www.duffandphelps.com\/assets\/pdfs\/publications\/valuation\/coc\/us-recommended-erp-and-risk-free-rate-table-15nov2016.pdf\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\">comparable rate<\/a><span>&nbsp;<\/span>at the end of 2008 was 4.5%. At the same time, the equity risk premium also decreased, from 6.0% to 5.5%.<\/div>\n<h3 style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #3863a0; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.3em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: 600; letter-spacing: normal; line-height: 1.3em; margin: 2em 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">High Prices for Publicly-traded Equities<\/h3>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Business values are often determined with reference to public equities, and with the<span>&nbsp;<\/span><a href=\"https:\/\/www.bloomberg.com\/quote\/SPX:IND\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\">S&amp;P 500<\/a><span>&nbsp;<\/span>and<span>&nbsp;<\/span><a href=\"http:\/\/www.nasdaq.com\/\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\">NASDAQ<\/a><span>&nbsp;<\/span>at or near record levels, those looking to sell a business benefit from a comparable increase in prices.<\/div>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">All of these factors have led to an acquisition market ideal for selling a business. Large acquisitions have recently been made for eye-popping prices. Over the past year:<\/div>\n<ul style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; list-style: none; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">\n<li style=\"border: 0px; box-sizing: border-box; line-height: 1.5em; list-style-type: disc; margin: 0px 0px 0.75em 30px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\">JAB Holding Company offered to acquire Panera Bread for $7.5 billion, approximately 19.5x Panera\u2019s EBITDA according to<span>&nbsp;<\/span><a href=\"http:\/\/www.nrn.com\/mergers-acquisitions\/jab-holding-buy-panera-bread-75b\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\">Nation\u2019s Restaurant News<\/a>.<\/li>\n<li style=\"border: 0px; box-sizing: border-box; line-height: 1.5em; list-style-type: disc; margin: 0px 0px 0.75em 30px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\">Private equity owned Petsmart acquired pet product site Chewy in the largest acquisition of a VC-backed internet retailer. Chewy is one of the fastest-growing eCommerce retailers<span>&nbsp;<\/span><a href=\"https:\/\/www.recode.net\/2017\/4\/18\/15339208\/petsmart-chewy-acquisition-price-3-35-billion\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\">on the planet<\/a>.<\/li>\n<li style=\"border: 0px; box-sizing: border-box; line-height: 1.5em; list-style-type: disc; margin: 0px 0px 0.75em 30px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\">Unilever acquired Dollar Shave Club in 2016 for $1 billion, paying<a href=\"https:\/\/www.unilever.com\/news\/press-releases\/2016\/unilever-acquires-dollar-shave-club.html\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\"><span>&nbsp;<\/span>6.67x 2015 sales and 5x projected 2016 sales<\/a>.<\/li>\n<\/ul>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Despite these favorable conditions, selling a business still requires advance planning and thought. Numerous factors can positively or negatively affect the value of your business. Addressing these issues early can be beneficial when it comes time to sell.<\/div>\n<h2 style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #3863a0; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.5em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: 600; letter-spacing: normal; line-height: 1.3em; margin: 2em 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">How Long Does Selling a Business Take?<\/h2>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">The duration of the sale process varies. One determining factor is the size of your company.<span>&nbsp;<\/span><a href=\"http:\/\/www.bizbuysell.com\/news\/article122.html\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\">As of the end of 2016<\/a>, the median time a small business was on the market was a little over 5 months (160 days), down from a peak of 200 days in mid-2012. For larger companies, the sale process can take between<span>&nbsp;<\/span><a href=\"http:\/\/digitalcommons.pepperdine.edu\/cgi\/viewcontent.cgi?article=1009&amp;context=gsbm_pcm_pcmr\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\">5 and 12 months<\/a>, as indicated below.<\/div>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\"><img decoding=\"async\" alt=\"Chart 4: Average Number of Months to Close One Deal\" src=\"https:\/\/uploads.toptal.io\/blog\/image\/123130\/toptal-blog-image-1495508748923-8744f345f67ea4fadf480ed4ab2d71ef.png\" style=\"border: 0px; box-sizing: border-box; display: block; margin: 0px auto 7px; max-width: 100%; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline; width: 860.5px;\" \/><\/div>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">As a<span>&nbsp;<\/span><a href=\"https:\/\/www.toptal.com\/finance\/valuation\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\">business<span>&nbsp;<\/span><\/a><a href=\"https:\/\/www.toptal.com\/finance\/valuation\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\">valuation<\/a><a href=\"https:\/\/www.toptal.com\/finance\/valuation\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\"><span>&nbsp;<\/span>expert<\/a>, my experience is much the same. The owner of a larger business is more likely to employ a M&amp;A advisor to sell the business, and the advisor is more likely to conduct an<span>&nbsp;<\/span><a href=\"https:\/\/uk.practicallaw.thomsonreuters.com\/6-107-3766?transitionType=Default&amp;contextData=(sc.Default)&amp;firstPage=true&amp;bhcp=1\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\">auction process<\/a><span>&nbsp;<\/span>to maximize the business value. In addition, as the business becomes more complex, the involvement of more people can lengthen the due diligence process. I have led due diligence teams in large acquisitions where we regularly conducted meetings with as many as fifteen people, including specialists from various departments. Inevitably, inboxes became crowded and the frequency of meetings increased. It became more difficult to ensure that everybody involved was on the same page.<\/div>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">The time it takes to sell your business is also based on the dynamic balance of business sellers and business buyers in the market. The importance of this is particularly pronounced in the small business acquisition market, as seen in the chart below.<span>&nbsp;<\/span><a href=\"http:\/\/www.bizbuysell.com\/news\/article110.html\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\">In 2012,<\/a><span>&nbsp;<\/span>fewer buyers had the resources to buy a business, and acquisition financing from banks and other lenders was still negatively affected by the 2008 financial crisis. As the number of buyers and availability of financing increased, the demand by buyers increased, and median time to sell a business decreased.<\/div>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\"><img decoding=\"async\" alt=\"Chart 5: Median Days on Market over Time\" src=\"https:\/\/uploads.toptal.io\/blog\/image\/123138\/toptal-blog-image-1495555025094-5921581e9c72f9aeb28b637a4be0e30e.png\" style=\"border: 0px; box-sizing: border-box; display: block; margin: 0px auto 7px; max-width: 100%; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline; width: 860px;\" \/><\/div>\n<h2 style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #3863a0; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.5em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: 600; letter-spacing: normal; line-height: 1.3em; margin: 2em 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Considerations in Determining When to Sell Your Business<\/h2>\n<h3 style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #3863a0; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.3em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: 600; letter-spacing: normal; line-height: 1.3em; margin: 2em 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Your Motivations for Selling<\/h3>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">In general, the value of a business is equal to the sum of all expected future cash flows. When the value of the offer is greater than your projected future value of the firm, it\u2019s time to sell.<\/div>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">\u201cValue\u201d can have many meanings. For one, the business may hold financial or strategic value that makes it compelling to an acquirer. Alternately, the business owner may have other financial uses for the sale proceeds\u2014if the return on the alternative investment is higher than on the business, it\u2019s also time to sell.<\/div>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">However, there can be non-financial motivations for selling a business. I frequently see business owners who have spent a significant portion of their lives building a business and are simply ready to move on to the next venture. Others sell for lifestyle reasons: a former client sold several businesses over 20+ years to fund his travels around the world. Had he agreed to stay with these companies post-sale, he would have received higher valuations. Still, the flexibility to travel and pursue adventures remained his priority.<\/div>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">This is consistent with seller surveys. According to a<span>&nbsp;<\/span><a href=\"http:\/\/www.bizbuysell.com\/shared\/BizBuySell_DemographicSurvey_WhitePaper_2016.pdf\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\">2016 survey<\/a>, the top motivation for small business owners to sell their businesses was retirement (40%), followed by burnout (21%) and the desire to own a bigger business (20%).<\/div>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\"><img decoding=\"async\" alt=\"how to sell a business\" src=\"https:\/\/uploads.toptal.io\/blog\/image\/123132\/toptal-blog-image-1495508773166-be692302a3651f5e1c8ef276d6c52b0a.png\" style=\"border: 0px; box-sizing: border-box; display: block; margin: 0px auto 7px; max-width: 100%; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline; width: 860.5px;\" title=\"\" \/><\/div>\n<h3 style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #3863a0; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.3em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: 600; letter-spacing: normal; line-height: 1.3em; margin: 2em 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Business Growth<\/h3>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Above all else, a buyer wants assurance that the cash flows paid for will be realized after the sale. Selling a business will be easier, and the value received by shareholders maximized, if the business is growing and profitable. The ideal time at which to sell a business is when cash flow, growth, and consequent valuations are going to peak. When a seller or buyer anticipates a decline in the rate of growth, it could result in a significant drop in value. As you might expect, this is not a recommended time to pursue a sale.<\/div>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">The importance of growth to business value and sale timing can be illustrated by the<span>&nbsp;<\/span><a href=\"http:\/\/www.investopedia.com\/terms\/g\/gordongrowthmodel.asp\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\">Constant (Gordon) Dividend Growth<span>&nbsp;<\/span><\/a><a href=\"http:\/\/www.investopedia.com\/terms\/g\/gordongrowthmodel.asp\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\">Model<\/a>:<span>&nbsp;<\/span><em style=\"border: 0px; box-sizing: border-box; font-style: italic; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\">Value of the Stock = Dividend \/ (Required Rate of Return &#8211; Expected Dividend Growth Rate)<\/em><\/div>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Let\u2019s apply this formula to an example. If a business pays $1 million in dividends, and the required rate of return is 13.5%, a business that has no dividend growth, all other factors held constant, would be worth approximately $7.4 million. On the other hand, if the same business is expected to grow 1% per year, the value increases to $8 million. For a company that does not pay dividends, the same principle can be applied to cash flow. In this example, each percent increase in expected growth leads to an 8% increase in value.<\/div>\n<h3 style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #3863a0; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.3em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: 600; letter-spacing: normal; line-height: 1.3em; margin: 2em 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Tax Considerations<\/h3>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Just as the<span>&nbsp;<\/span><a href=\"http:\/\/www.nsba.biz\/wp-content\/uploads\/2017\/02\/Year-End-Economic-Report-2016.pdf\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\">legal form of business<\/a><span>&nbsp;<\/span>at a business\u2019 inception is determined by tax considerations, when it comes time to sell a business, the choice among a merger, sale of stock, or sale of assets should also factor in tax implications.<\/div>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">For example, a sale of assets will likely<span>&nbsp;<\/span><a href=\"https:\/\/www.irs.gov\/businesses\/small-businesses-self-employed\/sale-of-a-business\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\">result in capital gain or loss treatment<\/a>, whereas an employment agreement results in ordinary income and is taxed at a higher rate. Even in a sale of assets, you should allocate the purchase price among assets in a tax-efficient manner. An allocation to inventory or short-lived assets will typically result in more favorable tax treatment than an allocation to real property or goodwill.<\/div>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Even expectations of a change in the US tax laws can impact the sale of businesses. If the current presidential administration were likely to simplify the tax code and decrease the capital gains tax rate, business owners would likely wait to sell. When I\u2019ve experienced cases such as these, the running joke among M&amp;A professionals was that business sellers would likely live on artificial life support in order to survive into the new tax year and reap higher net proceeds.<\/div>\n<h3 style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #3863a0; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.3em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: 600; letter-spacing: normal; line-height: 1.3em; margin: 2em 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Buyer Motivations<\/h3>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">The market for acquisitions is dynamic. An owner or manager seeking to sell a business should be aware of industry-specific developments and direct their selling efforts to leverage those trends.<\/div>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">In my acquisitions work for an insurance company, our growth strategy was to acquire companies in markets that were overseas and less competitive. We also focused on acquisitions that would add internet sales to our existing team of insurance agents. Some of our competitors were seeking similar acquisitions. Business owners aware of those industry dynamics were able to develop a business sale strategy based on these dynamics, maximizing shareholder value.<\/div>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Here are additional examples of industry-specific strategies:<\/div>\n<ul style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; list-style: none; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">\n<li style=\"border: 0px; box-sizing: border-box; line-height: 1.5em; list-style-type: disc; margin: 0px 0px 0.75em 30px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\">A fast-growing business in a slow-growth industry should focus on strategic buyers seeking high growth. In May 2016, food company Hormel paid $286 million for<span>&nbsp;<\/span><a href=\"http:\/\/www.foodbusinessnews.net\/articles\/news_home\/Financial-Performance\/2016\/05\/What_does_Hormel_see_in_Justin.aspx?ID=%7BA9696DD8-4AC3-4649-BC3A-E57561951905%7D\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\">Justin\u2019s, a fast-growing<\/a><span>&nbsp;<\/span>producer of organic nut butters.<\/li>\n<li style=\"border: 0px; box-sizing: border-box; line-height: 1.5em; list-style-type: disc; margin: 0px 0px 0.75em 30px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\">Companies with a younger customer base can be good acquisitions for established companies in the same space. Wal-Mart recently<span>&nbsp;<\/span><a href=\"https:\/\/www.recode.net\/2017\/3\/20\/14989930\/walmart-ecommerce-ceo-marc-lore-more-acquisitions\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\">sought to expand its customer base to younger consumers<\/a><span>&nbsp;<\/span>by spending $200 million on eCommerce startups with direct-to-consumer models, including Jet.com, Moosejaw, Shoebuy, and ModCloth.<\/li>\n<li style=\"border: 0px; box-sizing: border-box; line-height: 1.5em; list-style-type: disc; margin: 0px 0px 0.75em 30px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\">For private equity buyers, businesses that lead to increased sales, lowered overhead, and increased gross margins continue to be attractive. These buyers are attracted to assets with considerable scope for optimization and efficiency enhancements.<\/li>\n<li style=\"border: 0px; box-sizing: border-box; line-height: 1.5em; list-style-type: disc; margin: 0px 0px 0.75em 30px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\">For strategic buyers, decisions about capital investments are often made by comparing<span>&nbsp;<\/span><a href=\"http:\/\/www.mckinsey.com\/business-functions\/strategy-and-corporate-finance\/our-insights\/the-five-types-of-successful-acquisitions\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\">build vs. buy options<\/a>. A business that enables a strategic buyer to reach its financial or strategic goals will always have a pool of potential acquirers.<\/li>\n<\/ul>\n<h2 style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #3863a0; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.5em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: 600; letter-spacing: normal; line-height: 1.3em; margin: 2em 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">The Value of Advisors<\/h2>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">In selling a business, you may be tempted to cut costs and undertake the task alone. However, the utilization of experienced M&amp;A lawyers is always advisable, as contracts allocate the risk of the transaction between parties, and often contain detailed financial terms. Retaining an<span>&nbsp;<\/span><a href=\"https:\/\/www.toptal.com\/finance\/mergers-and-acquisitions\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\">M&amp;A<span>&nbsp;<\/span><\/a><a href=\"https:\/\/www.toptal.com\/finance\/mergers-and-acquisitions\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\">advisor<\/a><a href=\"https:\/\/www.toptal.com\/finance\/mergers-and-acquisitions\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\"><span>&nbsp;<\/span><\/a>can also lead to a higher price for the sale of a business. Additional advisors such as accountants or technology and human resource specialists can also add value in specific situations.<\/div>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">As a financial consultant, I worked with a business owner who initially attempted to sell his business on his own by generating his own list of competitors and other potential buyers. After failing, he assembled a team of lawyers and M&amp;A advisors late in the process. Ultimately, this unsuccessful sales attempt tarnished the sale process and raised questions about the value of the business, ultimately leading to a 25% lower sale price. In addition, the owner, who was originally interested in remaining with the business post-sale, was forced to sell to a financial buyer with a different strategic vision. He was soon forced out of the company. Though this was an extreme case, I cannot overstate the importance of building out an experienced team of advisors.<\/div>\n<h3 style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #3863a0; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.3em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: 600; letter-spacing: normal; line-height: 1.3em; margin: 2em 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Financial Intermediaries<\/h3>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">The two types of financial intermediaries include a) M&amp;A advisors, and b) business brokers.<\/div>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Business brokers are generally involved in the sale of smaller firms (typically with values of under $5 million). Many business brokers list businesses for sale in an online database with basic information but do not proactively call potential acquirers. With transactions of this size, the broker faces more difficulty \u201cfully marketing\u201d the transaction and contacting a large number of potential strategic and financial buyers. Compared to business brokers, M&amp;A advisors handle larger transactions and engage in more pre-transaction business planning. They also contact a wider variety and larger number of potential buyers.<\/div>\n<h4 style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #3863a0; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: 600; letter-spacing: normal; line-height: 1.3em; margin: 2em 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">The Benefits of Using a Financial Intermediary Include:<\/h4>\n<ul style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; list-style: none; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">\n<li style=\"border: 0px; box-sizing: border-box; line-height: 1.5em; list-style-type: disc; margin: 0px 0px 0.75em 30px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\">Reduced time and attention necessary from the business owner. The process of selling a business can often last between six and twelve months. Most business owners don\u2019t have the time or ability to supervise each stage of the process without diverting needed attention away from current business operations.<\/li>\n<li style=\"border: 0px; box-sizing: border-box; line-height: 1.5em; list-style-type: disc; margin: 0px 0px 0.75em 30px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\">Buffer between buyer and seller. This is especially important in situations where the seller of the business is seeking to keep its plans confidential; an intermediary can solicit interest on a \u201cno-names\u201d basis.<\/li>\n<li style=\"border: 0px; box-sizing: border-box; line-height: 1.5em; list-style-type: disc; margin: 0px 0px 0.75em 30px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\">A level playing field between novice sellers and experienced buyers. Especially with financial buyers or active strategic buyers, the difference in knowledge of the acquisition process can be vast. Private equity buyers can buy dozens of businesses each year, and the most active strategic buyers, such as Google, can acquire<span>&nbsp;<\/span><a href=\"https:\/\/www.crunchbase.com\/organization\/google\/acquisitions\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\">10+ companies in a year<\/a>. A business owner selling a business will have trouble competing in knowledge.<\/li>\n<li style=\"border: 0px; box-sizing: border-box; line-height: 1.5em; list-style-type: disc; margin: 0px 0px 0.75em 30px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\">Network of potential buyers and knowledge of marketing pitches. An experienced financial intermediary with a strong network and marketing knowledge is well-positioned to generate interest in your business. If successful, the price at which you can sell your business will be enhanced by creating competition among buyers in an auction process.<\/li>\n<li style=\"border: 0px; box-sizing: border-box; line-height: 1.5em; list-style-type: disc; margin: 0px 0px 0.75em 30px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\">Experience with the due diligence process and legal documentation. The due diligence process whereby buyers examine the books and records of the business being sold, can be too time-consuming and complex a task for business owners to undertake themselves. In addition, experienced financial intermediaries help create a transaction structure and collaborate with attorneys on legal documentation.<\/li>\n<\/ul>\n<h4 style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #3863a0; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: 600; letter-spacing: normal; line-height: 1.3em; margin: 2em 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">The Drawbacks of Using a Financial Intermediary Include:<\/h4>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\"><strong style=\"border: 0px; box-sizing: border-box; font-weight: 600; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\">Price<\/strong><\/div>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Financial intermediaries can either charge a fixed transaction fee, a retainer, or both. The business seller will also be responsible for the expenses of the intermediary.<\/div>\n<ul style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; list-style: none; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">\n<li style=\"border: 0px; box-sizing: border-box; line-height: 1.5em; list-style-type: disc; margin: 0px 0px 0.75em 30px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\">Business broker fees are generally in the range of 10% of the acquisition price. They typically do not charge a retainer, and fees are only paid upon the sale of the business.<\/li>\n<li style=\"border: 0px; box-sizing: border-box; line-height: 1.5em; list-style-type: disc; margin: 0px 0px 0.75em 30px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\">Fees for M&amp;A advisors vary more widely. The fixed transaction fee for selling a business generally starts in the $40-60,000 range, and many advisors base their \u201csuccess fees\u201d on the<span>&nbsp;<\/span><a href=\"https:\/\/www.divestopedia.com\/definition\/886\/lehman-scale\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\">\u201cDouble Lehman\u201d formula<\/a>: 10% of first $1 million of transaction value, 8% of second $1 million, 6% of the third $1 million, 4% of the fourth $1 million, and 2% of everything above that. According to a<span>&nbsp;<\/span><a href=\"http:\/\/www.exitstrategiesgroup.com\/wp-content\/uploads\/2017\/03\/The_Value_of_Middle_Market_Investment_Bankers.pdf\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\">2016 survey<\/a>, typical middle market transaction fees were as follows (based on percentage of transaction value):\n<ul style=\"border: 0px; box-sizing: border-box; font-size: 1em; list-style: none; margin: 1em 0px 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\">\n<li style=\"border: 0px; box-sizing: border-box; line-height: 1.5em; list-style-type: circle; margin: 0px 0px 0.75em 30px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\">$10 million 3.5% \u2013 5%<\/li>\n<li style=\"border: 0px; box-sizing: border-box; line-height: 1.5em; list-style-type: circle; margin: 0px 0px 0.75em 30px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\">$50 million 2% \u2013 3%<\/li>\n<li style=\"border: 0px; box-sizing: border-box; line-height: 1.5em; list-style-type: circle; margin: 0px 0px 0.75em 30px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\">$100 million 1% \u2013 1.5%<\/li>\n<li style=\"border: 0px; box-sizing: border-box; line-height: 1.5em; list-style-type: circle; margin: 0px 0px 0px 30px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\">$250 million 0.75% \u2013 1%<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">You should align your incentives with those of the intermediary. If an advisor\u2019s retainer is disproportionately high, their incentive to complete a deal is lessened. In these cases, the business owner should resist fee arrangements that include a relatively large up-front fee. On the other hand, if the \u201csuccess fee\u201d is disproportionately high and the advisor only receives significant compensation upon a sale, it creates an incentive for the advisor to complete a deal\u2014even a bad one.<\/div>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\"><strong style=\"border: 0px; box-sizing: border-box; font-weight: 600; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\">Disclosure of sensitive information<\/strong><\/div>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">An M&amp;A advisor may contact hundreds of potential buyers and circulate confidential business information in an effort to create a robust auction and maximize business value. The mere disclosure that the business owner is considering a sale can significantly impact customers, competitors, and employees. An experienced advisor can limit the risk of confidential information being disclosed.<\/div>\n<div data-role=\"blog_subscribe\" data-view=\"blog_subscribe#form\" style=\"-webkit-text-stroke-width: 0px; background-color: white; border-radius: 6px; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 15px; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; margin: 0px; min-height: 0px; min-width: 0px; orphans: 2; padding: 30px 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">\n<div style=\"border: 0px; box-sizing: border-box; display: flex; flex-wrap: wrap; height: auto; margin: 0px; min-height: 0px; min-width: 0px; overflow: visible; padding: 0px; vertical-align: baseline;\">\n<div style=\"border: 0px; box-sizing: border-box; margin: 0px 0px 10px; min-height: 0px; min-width: 0px; padding: 0px; position: relative; vertical-align: baseline;\">\n<div style=\"border: 0px; box-sizing: border-box; color: #2557a1; display: inline-block; font-size: 17px; font-weight: 700; line-height: 23px; margin: 0px 10px 0px 0px; min-height: 0px; min-width: 0px; padding: 0px; text-transform: none; vertical-align: baseline;\">\n<h3 style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #3863a0; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.3em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: 600; letter-spacing: normal; line-height: 1.3em; margin: 2em 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Independent Valuation Experts<\/h3>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Retaining an independent valuation expert can maximize value, especially when used in conjunction with an M&amp;A advisor. With a large percentage of M&amp;A advisor fees being paid only if a transaction closes, the M&amp;A advisor experiences an inherent conflict of interest. That is, a business cheaply valued will sell more quickly than one that is fully valued. An independent valuation expert provides the business owner with a second opinion and a market check.<\/div>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">As with employing a financial intermediary, the downside of retaining an independent business valuation expert is price. They can also lengthen the sale process. For many businesses, an appraisal<span>&nbsp;<\/span><a href=\"https:\/\/www.bloomberg.com\/news\/articles\/2014-06-09\/is-it-worth-getting-a-valuation-for-your-small-business\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\">can cost between $3,000 and $40,000<\/a><span>&nbsp;<\/span>and take 4-6 weeks, although more cost-effective options are available for smaller companies. Valuations of larger or more complicated business can take months and be far more costly.<\/div>\n<h3 style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #3863a0; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.3em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: 600; letter-spacing: normal; line-height: 1.3em; margin: 2em 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Legal Advisors<\/h3>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">The involvement of experienced merger and acquisition lawyers is critical. After all, structuring a business sale transaction and negotiating the documents are exercises in risk allocation. These documents ensure that the seller will receive the full amount owed to them and will have limited liability post-sale, while also ensuring that buyers receive the value from the acquisition.<\/div>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">To counter typical buyer protection provisions such as<span>&nbsp;<\/span><a href=\"https:\/\/content.next.westlaw.com\/8-382-3760?transitionType=Default&amp;contextData=(sc.Default)&amp;__lrTS=20170510230623301&amp;firstPage=true&amp;bhcp=1\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\">representations and warranties<\/a><span>&nbsp;<\/span>or<span>&nbsp;<\/span><a href=\"http:\/\/www.pbs.org\/newshour\/making-sense\/know-non-compete-agreements\/\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\">noncompetition<\/a><span>&nbsp;<\/span>and nonsolicitation agreements, experienced legal advisors can help you obtain favorable terms and secure protections for you. This is especially important if you are selling to a business of much larger size, which would inherently have more negotiating power.<\/div>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\"><img decoding=\"async\" alt=\"how to sell a business\" src=\"https:\/\/uploads.toptal.io\/blog\/image\/123133\/toptal-blog-image-1495508802349-b0d22892894bae56eb7ac18025326da8.png\" style=\"border: 0px; box-sizing: border-box; display: block; margin: 0px auto 7px; max-width: 100%; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline; width: 860px;\" title=\"selling business\" \/><\/div>\n<h2 style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #3863a0; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.5em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: 600; letter-spacing: normal; line-height: 1.3em; margin: 2em 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Determining the Right Price<\/h2>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Over the years, I\u2019ve come to find that business valuation is as much art as science, as evidenced by the fact that<span>&nbsp;<\/span><a href=\"http:\/\/digitalcommons.pepperdine.edu\/cgi\/viewcontent.cgi?article=1009&amp;context=gsbm_pcm_pcmr\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\">27% of business sale transactions don\u2019t close<\/a>. Of those that don\u2019t close, 30% fail because of a gap in valuation. However, experts generally agree that there are three primary methods of business valuation: discounted cash flow, market multiples, and asset valuation.<\/div>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\"><img decoding=\"async\" alt=\"how to sell a business\" src=\"https:\/\/uploads.toptal.io\/blog\/image\/123139\/toptal-blog-image-1495555102155-b0cd4fd3568f46a665b2dd739349ef57.png\" style=\"border: 0px; box-sizing: border-box; display: block; margin: 0px auto 7px; max-width: 100%; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline; width: 860px;\" title=\"sell a business\" \/><\/div>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">While all of these methods can prove useful in the right situation, valuing earnings or cash flow will generally provide a more accurate view of the value of the business being sold. Even better, a business owner selling a business knows of an identical business that has been recently sold and knows the price that it has been sold at.<\/div>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\"><img decoding=\"async\" alt=\"how to sell a business\" src=\"https:\/\/uploads.toptal.io\/blog\/image\/123140\/toptal-blog-image-1495555154540-dd6821f17cbaa60954c00aa3e69e3cb4.png\" style=\"border: 0px; box-sizing: border-box; display: block; margin: 0px auto 7px; max-width: 100%; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline; width: 860px;\" title=\"\" \/><\/div>\n<h3 style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #3863a0; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.3em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: 600; letter-spacing: normal; line-height: 1.3em; margin: 2em 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Discounted Cash Flow and Capitalization of Earnings Methods<\/h3>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Absent a recent comparable business sale for benchmarking,<span>&nbsp;<\/span><a href=\"http:\/\/edu.nacva.com\/preread\/2012BVTC\/2012v1_FTT_Chapter_Six.pdf\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\">discounted cash flow or capitalization of earnings valuation methods<\/a><span>&nbsp;<\/span>can be utilized. On one hand, discounted cash flow models are typically used to model growing businesses, and they estimate pro forma projected cash flows for a reasonable period into the future. These are then discounted back to the present using a market-derived discount rate. Capitalization of earnings models, on the other hand, are used for businesses where future growth is difficult to estimate. This method\u2019s valuations take pro forma earnings and divide them by a capitalization rate.<\/div>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">The pro formas are adjusted for unusual or nonrecurring events and are intended to normalize the numbers. For example, with private companies, it\u2019s not uncommon for executive compensation to vary from industry standards. The model should be adjusted to reflect compensation levels that would be more typical. Similarly, private companies may have contracts with other companies also owned by the owner, and the pro formas should include adjustments if those contracts vary from industry norms.<\/div>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">It is important to note that the appropriate discount rate can be difficult to determine. The discount rate always starts with the \u201crisk-free rate,\u201d a long-term US Treasury bond, and is adjusted upward to take into account the extra risk of buying a business. An<span>&nbsp;<\/span><a href=\"http:\/\/www.investopedia.com\/terms\/e\/equityriskpremium.asp\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\">equity risk premium<\/a><span>&nbsp;<\/span>is then considered, available from sources such as<span>&nbsp;<\/span><a href=\"http:\/\/www.duffandphelps.com\/insights\/publications\/cost-of-capital\/index\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\">Duff &amp; Phelps<\/a>, and may create an additional premium for a smaller company or a company in a more uncertain industry. On top of those adjustments, the discount rate may be adjusted even higher on the basis of \u201crule of thumb\u201d estimates that the business appraiser believes are appropriate to determine the true risk of the company.<\/div>\n<h3 style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #3863a0; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.3em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: 600; letter-spacing: normal; line-height: 1.3em; margin: 2em 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Market Multiples<\/h3>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">The starting point for a market multiple valuation is a public company in the same industry. Multiples such as price-to-earnings, price-to-sales, price-to-EBITDA, and price-to-book are widely available from sources such as<span>&nbsp;<\/span><a href=\"https:\/\/www.bloomberg.com\/\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\">Bloomberg<\/a><span>&nbsp;<\/span>and<span>&nbsp;<\/span><a href=\"https:\/\/www.google.com\/finance\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\">Google Finance<\/a>. The multiples for the public companies are then applied to the appropriate data for the business being valued. Adjustments to the resulting number are then applied to account for the difference in liquidity between publicly traded stock, which can be sold easily, and a controlling interest in a company, especially if it\u2019s privately held.<\/div>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Though high public comparables are great for owners selling their business, they may not reflect the actual value of the company. This is because the prices for public stocks are strongly influenced by general stock market sentiment and investor enthusiasm for sectors that are currently in favor. For example, a technology company will currently have higher market multiples than companies with similar business prospects because of keen investor interest in stocks in the technology sector. In addition, business valuation experts relying on market multiples often find it difficult to develop an appropriate group of public companies. A business valuation that starts with a broad group of comparable companies may not truly reflect the value of the company being sold.<\/div>\n<h3 style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #3863a0; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.3em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: 600; letter-spacing: normal; line-height: 1.3em; margin: 2em 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Asset Valuation<\/h3>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">The<span>&nbsp;<\/span><a href=\"http:\/\/www.investopedia.com\/terms\/a\/asset-based-approach.asp\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\">asset valuation method<\/a><span>&nbsp;<\/span>of valuing a company being sold is generally limited to holding companies or asset-rich companies since the value of a business\u2019 assets have little to do with the company\u2019s future cash flow generation. In the case of a holding company, the value of the company is made up of a collection of other corporations or equity or debt investments. Each asset may have its own policy about cash flow distributions to the holding company, so a discounted cash flow valuation is meaningless.<\/div>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">However, exceptions exist with energy or commodity companies. In the case of natural resource companies, cash flow is important, but the value is ultimately determined by the company\u2019s assets underneath the ground. Similarly, a gold company may provide cash to its owners on a regular basis, but its gold is the most important value driver. The price of gold decreasing from $1,850 per ounce in 2011 to $1,200 per ounce in 2017 will outweigh any change in dividend policy by management.<\/div>\n<h2 style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #3863a0; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.5em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: 600; letter-spacing: normal; line-height: 1.3em; margin: 2em 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Maximizing Shareholder Value<\/h2>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">A significant portion of businesses that are offered for sale eventually don\u2019t sell. As mentioned previously, one of the major causes is the gap between what the owner believes the business is worth and the price the buyer is willing to pay. Oftentimes, this is because an owner has focused too much on business operations, and not done enough to research or plan for its eventual sale. To avoid this issue, implement the following best practices:<\/div>\n<h3 style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #3863a0; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.3em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: 600; letter-spacing: normal; line-height: 1.3em; margin: 2em 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Create a Deep Management Team<\/h3>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">The common advice for employees is to \u201c<a href=\"https:\/\/hbr.org\/2011\/10\/making-yourself-indispensable\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\">make yourself indispensable<\/a>\u201d\u2014that is, contribute so much that you become irreplaceable by others. However, for business owners, the best course of action is the opposite: you should ensure that the rest of the team can operate<span>&nbsp;<\/span><em style=\"border: 0px; box-sizing: border-box; font-style: italic; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\">without you.<\/em><span>&nbsp;<\/span>Though you may have been the main point of contact with key customers for years, consider delegating and transitioning these relationships to your team. Otherwise, if and when you leave, there is no guarantee that these clients will stay with the company. The risk of losing important sources of revenue or supply can significantly reduce a purchase price or lead to a failed transaction.<\/div>\n<h3 style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #3863a0; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.3em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: 600; letter-spacing: normal; line-height: 1.3em; margin: 2em 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Examine and Adjust Operational Efficiencies Strategically<\/h3>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Examine your current business practices and, if necessary, adopt efficient operating procedures before the sale. This may involve investments in new equipment or technology, or it may mean adding or reducing staff. For example, buyers will be less interested in a business that diverts the time of highly-compensated employees towards tasks that can be done more cost-effectively by others.<\/div>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">I have been involved in many transactions where the pro forma financials and resulting purchase price are adjusted to account for needed or excess employees. If a buyer senses a risk that efficiencies and cost savings are not achievable, they will adjust the purchase price downward. Therefore, implementing these measures before a sale reduces can help justify a higher valuation.<\/div>\n<h3 style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #3863a0; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.3em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: 600; letter-spacing: normal; line-height: 1.3em; margin: 2em 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Broaden Your Customer Base<\/h3>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">For most businesses, sales revenue dictates the majority of its value. Buyers will always examine the business\u2019 customer base and evaluate the risk of customers leaving after the sale. For businesses with a concentrated customer base, the risk of losing of one or two customers can place downward pressure on the purchase price. You should broaden the customer base to reduce reliance on a small number of key customers.<\/div>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Alternatively, if you are heavily reliant on a single distribution channel, diversifying the distribution of products or services can also help maximize value. Multiple sources of revenue are always going to lead to a higher valuation.<\/div>\n<h3 style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #3863a0; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.3em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: 600; letter-spacing: normal; line-height: 1.3em; margin: 2em 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Build Out Robust Financial Reports and Systems<\/h3>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Buyers need to rely on accurate financial statements and systems to assess the financial performance of a business. I\u2019ve seen many large and complex businesses lack robust accounting and financial processes, relying too heavily on basic financial systems. This represents a risk to buyers. Ultimately, if the buyer can\u2019t rely on the seller\u2019s numbers, the buyer will either adjust the purchase price downward or cancel the transaction completely.<\/div>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Buyers prefer seller financial statements that are audited by a high-quality, independent, auditing firm. Many business owners use local accounting firms when they start their businesses, and<a href=\"https:\/\/www.toptal.com\/finance\/cfos\/cfo\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\"><span>&nbsp;<\/span>stay with them as the business grows<\/a>. As a result, the numbers may not properly incorporate procedures that would be used by a larger firm specializing in business accounting. The inability to provide comprehensive and professionally-prepared statements to a buyer might reduce the value of the company.<\/div>\n<h2 style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #3863a0; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.5em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: 600; letter-spacing: normal; line-height: 1.3em; margin: 2em 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Conclusion<\/h2>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">As a business owner, you have undoubtedly devoted a substantial part of your life to building your business. The decision to sell your business can be simultaneously scary and liberating. Richard Branson recently<span>&nbsp;<\/span><a href=\"http:\/\/www.independent.co.uk\/Business\/indyventure\/richard-branson-virgin-group-atlantic-records-biggest-business-risks-startup-entrepreneur-a7698711.html\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\">provided an interesting account<\/a><span>&nbsp;<\/span>of his decision to sell Virgin Records:<\/div>\n<blockquote style=\"-webkit-text-stroke-width: 0px; background-color: white; border-bottom-color: initial; border-bottom-style: initial; border-image: initial; border-left-color: rgb(240, 240, 240); border-left-style: solid; border-right-color: initial; border-right-style: initial; border-top-color: initial; border-top-style: initial; border-width: 0px 0px 0px 10px; box-sizing: border-box; color: #505050; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 15px; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px 0px 0px 15px; quotes: none; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">\n<div style=\"border: 0px; box-sizing: border-box; font-size: 1.2em; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\">\u201cSelling Virgin Records was one of the most difficult decisions I\u2019ve ever had to make. But it was also a necessary and calculated risk. I had never even thought about selling Virgin Records. In fact when<span>&nbsp;<\/span><em style=\"border: 0px; box-sizing: border-box; font-style: italic; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\"><a href=\"http:\/\/www.independent.co.uk\/topic\/emi\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\">EMI<\/a><\/em><span>&nbsp;<\/span>made their offer of $1 [billion] in 1992 we had just signed the<span>&nbsp;<\/span><em style=\"border: 0px; box-sizing: border-box; font-style: italic; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\"><a href=\"http:\/\/www.independent.co.uk\/topic\/rolling-stones\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\">Rolling Stones<\/a><\/em><span>&nbsp;<\/span>which was something we\u2019d been trying to do for twenty years. We had begun life as a small start-up, growing on the back of the success of Mike Oldfield\u2019s Tubular Bells. From a tiny start-up, we grew into the biggest independent record label in the world.<\/div>\n<div style=\"border: 0px; box-sizing: border-box; font-size: 1.2em; line-height: 1.5em; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\">But at the time of this offer we were going through expensive litigation in a court case against<span>&nbsp;<\/span><em style=\"border: 0px; box-sizing: border-box; font-style: italic; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\"><a href=\"http:\/\/www.independent.co.uk\/topic\/BritishAirways\" rel=\"noopener noreferrer\" style=\"border: 0px; box-sizing: border-box; color: #3976cb; margin: 0px; min-height: 0px; min-width: 0px; padding: 0px; vertical-align: baseline;\" target=\"_blank\">British Airways<\/a><\/em><span>&nbsp;<\/span>(which we eventually won) following their \u2018dirty tricks\u2019 campaign. If we had carried on running both companies they both would have closed\u2026[B]y selling Virgin Records we left both companies in strong positions and kept a lot people in their jobs. Both businesses are still thriving today.\u201d<\/div>\n<\/blockquote>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Investing in advance planning for the sale of your business is critical to realizing a return on the resources you have already put into it. It is natural to think that the time to properly position and sell your business is an unnecessary burden. However, this time is crucial for enhancing the sale price and ultimately helping you realize the full value of the business. The combination of the right team and adequate investment of time can be the difference between simply closing up shop and maximizing a source of future wealth.<\/div>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">Like Branson, whether you choose to spend this future wealth on a remote island in the sun or on your next venture, well, that\u2019s up to you!<\/div>\n<div style=\"-webkit-text-stroke-width: 0px; background-color: white; border: 0px; box-sizing: border-box; color: #303030; font-family: &quot;Proxima Nova&quot;, Arial, sans-serif; font-size: 1.2em; font-style: normal; font-variant-caps: normal; font-variant-ligatures: normal; font-weight: normal; letter-spacing: normal; line-height: 1.5em; margin: 0px 0px 1em; min-height: 0px; min-width: 0px; orphans: 2; padding: 0px; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-indent: 0px; text-transform: none; vertical-align: baseline; white-space: normal; widows: 2; word-spacing: 0px;\">&nbsp;<i>This <a href=\"https:\/\/www.toptal.com\/finance\/mergers-and-acquisitions\/selling-a-business\" target=\"_blank\">article<\/a> is originally posted at <a href=\"https:\/\/www.toptal.com\/finance\/mergers-and-acquisitions\/\" target=\"_blank\">Toptal<\/a><\/i> <\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<!--CusAds0-->\n<div style=\"font-size: 0px; height: 0px; line-height: 0px; margin: 0; padding: 0; clear: both;\"><\/div>","protected":false},"excerpt":{"rendered":"<p>Key Highlights Current market conditions are prime for selling a business. The market is experiencing high multiples due to plentiful dry powder held by private equity firms, record amounts of cash held by strategic corporate buyers, a low interest rate environment, and high prices for publicly-traded equities. The time it takes to sell generally ranges [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":""},"categories":[51,53],"tags":[],"class_list":["post-32","post","type-post","status-publish","format-standard","hentry","category-business-management","category-sales-and-marketing"],"_links":{"self":[{"href":"https:\/\/www.biznessvirgins.com\/index.php?rest_route=\/wp\/v2\/posts\/32","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biznessvirgins.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biznessvirgins.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biznessvirgins.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biznessvirgins.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=32"}],"version-history":[{"count":2,"href":"https:\/\/www.biznessvirgins.com\/index.php?rest_route=\/wp\/v2\/posts\/32\/revisions"}],"predecessor-version":[{"id":593,"href":"https:\/\/www.biznessvirgins.com\/index.php?rest_route=\/wp\/v2\/posts\/32\/revisions\/593"}],"wp:attachment":[{"href":"https:\/\/www.biznessvirgins.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=32"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biznessvirgins.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=32"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biznessvirgins.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=32"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}