Therefore, have at least three years of good financial statements - income, cash flow, and balance sheet - prepared. Get your financial house in order. The first thing buyers look at when attempting to determine the sustainability of earnings growth and estimation of market value are your financial statements. Companies with narrow profit margins or excessive amounts of debt are more likely to encounter difficulties during business downturns. Other important indicators of earnings quality are profit margins - gross margins, operating margins, and EBITDA (earnings before interest, taxes, depreciation and amortization) margins - as well as debt-to-equity ratios. As a result, all three are important to a buyer, and therefore all three are carefully scrutinized. Second, quality of personnel and quality of assets are important elements and indicators of the sustainability of earnings growth.
SELL MY BUSINESS DRIVERS
First, regardless of the analytical methodologies employed, earnings, earnings trends, and the demonstrable sustainability of earnings growth are among the critical drivers of indication of market value. The reasons for this are straightforward. In the long run, it will save you time, expense, and aggravation.Ģ) Prepare. When it comes to ascribing value to a business, sellers can expect buyers to focus on three things: quality of personnel, quality of assets, and quality of earnings. This will enable you to better anticipate how you and your company will be taxed on the proceeds of any transaction you might be considering, and thereby plan accordingly for the optimal outcome. Before you decide to sell your company or recapitalize its equity, therefore, you would be wise to consult with your M&A advisory, legal, accounting, and tax professionals to better understand your situation and your options. Also, corporate structure affects the transaction structure options available to help mitigate or defer such taxes and tax effects.Įvery transaction, every company, and every personal situation is different, with varying degrees of complication. Whether your company is a C-corporation, an S-corporation, a limited liability company, or a sole proprietorship will impact how transaction proceeds are taxed, as well as the near- and long-term tax implications for both buyer and seller.
It’s what you get to keep after taxes that counts. However, as with annual earnings and cash flow, it’s not what a buyer pays you for your company that counts. The underlying market value of your business is one thing, and it is important some of the key factors affecting market valuation will be discussed later in this article. Failure to take into account tax implications is a leading cause for merger and acquisition (M&A) transactions to crater. The reason for this is because corporate structure impacts the tax consequences of the sales transaction for both buyer and seller.
Readers are encouraged therefore to consult with their own advisers or to submit questions confidentially to the authors that may be specific to their own company or personal situation and needs.ġ) Plan. Planning is critical when it comes to selling a business.Īn overarching issue to consider when preparing your company for sale - one that is too frequently ignored - is the corporate structure of your company. Understanding these basic principles is a must for business owners, whether they are thinking of selling now or 10 years from now.īecause every situation is different and the questions contemplated in this article can be complex and complicated, there are no cookie-cutter or simple answers. In this article, we explore and discuss some of the critical factors that impact these and other important questions that business owners may have concerning this vitally important topic.
Why might I want - or need - to sell my business? What is the best way to go about selling my business? When is the best time to sell? To whom should I sell?
SELL MY BUSINESS PROFESSIONAL
How, when and to whom to sell a business that has been built over many years is perhaps the most important decision of a business owner’s professional life.
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