For years, you’ve built and operated a successful business in Portland. Whether the reason is for retirement, for health reasons, or to cash out for a good purchase price, you have decided the time has come to explore a sale or transition of ownership. At Sell My Business Portland, our bankers and business brokers have some 30 years of combined experience helping business owners like you transition to new ownership and realize the value you have created all these years. We know that the process of selling your business can be intimidating, and at the same time confusing. Selling a business is very different than the process of starting a business and running the day-to-day operations profitably. That’s why owners turn to consultants like business brokers here in Portland.
How Much is My Business Worth?
One of the first questions business owners want to get answered is “How much is my business worth if I sell it today?” Ultimately, it is the purchase price that will make or break your decision to sell. Just about any business owner would say they are open to taking some astronomical purchase price for their business and walking away. In other words, we all have our price. But the more serious question revolves around what will a ready, willing and able buyer pay me for the business in this market, today? We understand that maximizing the value you will see in a transaction is often your primary goal, but there are many factors to consider in valuing a business.
We have worked to successfully sell businesses in a variety of industries in the Portland area. These include light manufacturing, wholesale/distribution businesses, software companies, retail businesses like laundromats and car washes, beauty salons, restaurants, and e-commerce stores. Each industry has its own valuation baseline, driven by recent sales in the market and the nature of the business itself.
Traditionally, the value of your business will be expressed as a multiple of your adjusted net earnings, or EBITDA (earnings before interest, tax, depreciation and amortization). While that may sound confusing, it is not. Let’s break it down. First, a “multiple” describes the valuation multiple to be applied to whatever number we derive to be for your net earnings. Assume your business made $100,000 in profit last year. Applying a multiple means we would then multiply that net earnings figure by a “multiple” value to arrive a value for your business. Multiples vary based on industry, as we mentioned.
Let’s assume a four-times (4x) multiple will be applied to your business, because it is a distributor and recent sales of distributors in your industry and in the Pacific Northwest have fetched similar multiples. The value of your business that we will take to the market is then 4 times $100,000, or $400,000. This comparative approach to derive a business valuation multiple is similar to how real estate agents come up with the price to list a home for sale. They scour lists and records of recent sales to see what similar homes in the area have sold for, with similar property sizes, number of bedrooms and bathrooms, and amenities. These comparable sales are often referred to as “comps”.
If you take the real estate analogy a bit further, consider that homeowners will also order an appraisal to be done on the home when putting it up for sale. A professional real estate appraiser inspects the home and gives their opinion on its value. This is akin to having a business valuation completed on your business, either by a business broker, a CPA, or a professional who has certifications as a business valuation expert.
Why Should I Work with a Portland-Based Business Broker or Banker?
If you are considering selling your business, this is likely going to be the largest transaction of your lifetime. After decades of building a business, now is the time to cash out. You are much more likely to engage in a successful transaction if you work with a professional business broker or investment banker. Less than 20% of the businesses that go up for sale on Main Street or in the lower-middle market successfully are sold to a buyer. Those are not good odds. Choose to work with a group like Sell My Business Portland, and we can leverage our expertise in business valuation, marketing, our buyer’s lists, and in middle-manning the process of fielding and evaluating inquiries from potential buyers.
If you think about how much time and attention it takes to run your business, chances are you are not able to take on another full-time job in shopping the business for sale. And selling a business is a full time job, that requires a completely different skill set than manning a business day-to-day. Prepping your business for sale is going to require a full review of your financial records going back at least 3 years, and a “recast” of those financials to pull out all the discretionary expenses and personal expenses you have run through the company. Then we must go through the aforementioned process to determine the multiple to apply to your earnings so we can set a purchase price that the market is likely to bear.
From there, how will you put the word out about the business? Business brokers and bankers know how to put together a confidential investment memorandum, or CIM, that will be the marketing document to send to potential buyers. We also have access and experience to all of the online and offline advertising channels to help promote a business to buyers. Not to mention our in-house buyer’s list, which is a contact list of investors and private equity firms we have engaged with over the years who are interested in buying businesses.
Once buyers are interested, it helps to have a professional handling their inquiries so you do not get bogged down in communication with buyers who are not serious, or who ask endless questions about the business. Let us middle-man that process, and only bring the most qualified and interested buyers to your doorstep for a conversation. It’s also worth nothing that it can be helpful to have a third party involved, like a Portland business broker, to stand in between yourself and the buyer during negotiations on pricing and terms of the deal.
The Steps to Selling Your Business
Upon engaging a Portland business broker, we will interview you to gather all of the necessary information to build your CIM. We will also review your financial statements – including income statements, balance sheets, and tax returns over the past 3 years, at a minimum. It helps if your financial statements have been prepared or reviewed by a certified accountant. You will be asked to provide a list of your inventory (if you have inventory), as well as a list of top customers and top suppliers over the past 5 years. Buyers are interested to view in concentration in customer or supplier relationships, and to review contracts that are in place with suppliers.
At this point in the process, we may mutually choose to engage an outside party for a business valuation. Based on our experience and research of the market at the time, we should have a good idea on how to value the business and set a purchase price. But it is sometimes necessary to bring in another valuation expert.
After combing through the financials and preparing your CIM, we will prepare our buyer’s list by pinging our existing network and by doing research in the industry. We will advertise the business on business listing websites and industry publications. Once interested buyers start putting in their requests, Sell My Business Portland will obtain signed nondisclosure agreements from all buyers before releasing the CIM and engaging a buyer to answer any questions they may have. Once interested and qualified buyers have been vetted, we will introduce them to you and conduct conference calls or in-person meetings to hash out a deal. It is important during this phase of the process that you, as the seller, remember that you are interviewing the buyer just as much as they are doing their own due diligence on your company for sale.
Many business owners are concerned about how new ownership will treat their existing employees, suppliers, and customers. And rightfully so, as you have invested so much time and energy building the reputation of the business over the years.
If after several conversations the interested party would like to put an offer on the business, we will accept a Letter of Intent, or LOI, from the buyer. This spells out the offered purchase price and the desired deal terms offered to you to sell the business. We will counsel you on the good and bad of the LOI, and it is up to you whether or not you’d like to accept. Once we have an accepted LOI, the process moves into due diligence. The buyer will step up the intensity of their evaluation of every aspect of the business. Be prepared for a lot of work during this time, as we provide detailed answers and also work with our respective attorneys to complete an agreeable purchase agreement.
Signing the purchase agreement and accepting funds from the buyer takes place at closing, and you will then have successfully sold your business.
Contact Sell My Business Portland
Our team of bankers in Portland is standing by to help you evaluate the process of selling your business. Visit our contact page to learn more and to get in touch with the Sell My Business Portland team, The CBB Group, at the main downtown office.