Sell Side Articles

Before attempting to sell your business, it's important to determine if it is sellable. Here are some key factors to consider when evaluating the sellability of your business:

1. Financial Performance: A profitable and growing business is typically more sellable than a struggling one. To determine the financial performance of your business, you should review financial statements, tax returns, and other financial records to assess the business's revenue, expenses, cash flow, and profitability over time.

2. Customer Base: A diverse and loyal customer base is another key factor in the sellability of a business. A business with a strong reputation and loyal customer base is often more attractive to potential buyers.

3. Market Position: A business's market position and competition are important factors in determining its sellability. A business with a unique or strong market position that can withstand competition is often more sellable than a business in a saturated market.

4. Scalability: The scalability of a business, or its potential for growth and expansion, is another factor to consider. A business with scalability potential is more attractive to potential buyers, as it offers the opportunity for future growth.

5. Transferability: The ease of transferring ownership of the business is another important factor in its sellability. A business with well-documented processes, systems, and procedures is often more sellable than a business that is heavily reliant on the owner's expertise or involvement.

If you are unsure if your business is sellable, you may want to seek the advice of a business broker or other professionals with experience in buying and selling businesses. They can help you assess the value and marketability of your business and provide guidance on preparing your business for sale.

An SBA-approved business for sale refers to a business that is eligible for financing through the Small Business Administration (SBA) loan program. The SBA provides loan guarantees to lenders, which can help small business owners access financing to buy or expand a business. To be eligible for SBA financing, a business must meet certain criteria, including:

1. The business must be based in the United States.

2. The business must be a for-profit, small business as defined by the SBA.

3. The business must be able to demonstrate a reasonable ability to repay the loan.

4. The business must not be engaged in any illegal activity or have any outstanding tax liens or legal judgments.

5. The business must meet the SBA's size standards for the industry in which it operates.

When a business is listed as SBA-approved, it means that the business meets the SBA's eligibility criteria and has been pre-screened for financing. This can make it easier for buyers to obtain financing through an SBA loan program to purchase the business. Additionally, SBA-approved businesses may be more attractive to buyers because they have already gone through the screening process and have been deemed eligible for SBA financing.

It's important to note that being SBA-approved does not guarantee financing, as each loan application is evaluated on a case-by-case basis. However, being SBA-approved can increase the likelihood of obtaining financing through an SBA loan program to buy or expand a business.

Exit planning is a critical process for business owners who are planning to sell their business. Here are some steps you can take to do exit planning before selling your business:

1. Define Your Goals and Objectives: The first step in exit planning is to define your goals and objectives for selling the business. This can include financial goals, such as the desired sale price, as well as personal goals, such as retirement or pursuing other interests.

2. Prepare Your Business for Sale: Preparing your business for sale involves assessing the financial and operational aspects of your business to identify areas for improvement. This can include improving financial reporting, streamlining operations, and resolving any outstanding legal or regulatory issues.

3. Evaluate Your Options: Once your business is prepared for sale, you will need to evaluate your options for selling the business. This can include selling to a strategic buyer, private equity firm, or another business owner. You may also consider selling to key employees or family members.

4. Develop a Succession Plan: Developing a succession plan is essential to ensure a smooth transition of ownership and leadership. This can include identifying a successor, developing a transition plan, and providing training and support to ensure a successful transition.

5. Seek Professional Advice: Exit planning can be a complex process that requires expertise in financial analysis, legal review, and business operations. It's essential to seek professional advice from a business broker, accountant, or other professionals to ensure that the sale of the business is structured in a way that meets your goals and objectives.

In summary, exit planning is an essential process for business owners who are planning to sell their business. By defining your goals and objectives, preparing your business for sale, evaluating your options, developing a succession plan, and seeking professional advice, you can ensure a successful sale of your business and a smooth transition of ownership.

In the United States, there are no specific credentials or licenses required to sell a stock-based business. However, it's important to note that brokers and other professionals involved in the sale of a stock-based business may need to be licensed or registered in accordance with state and federal regulations. Here are some examples of licenses and registrations that may be required:

1. Real Estate License: If the sale of the business involves the transfer of real estate, the broker may need to be licensed as a real estate agent or broker in the state where the real estate is located.

2. Securities License: If the sale of the business involves the sale of securities, such as stock or ownership interests, the broker may need to be licensed as a securities broker or dealer by the Securities and Exchange Commission (SEC) or the Financial Industry Regulatory Authority (FINRA).

3. Business Broker License: Some states require business brokers to be licensed, registered, or certified. Requirements vary by state, so it's important to check the regulations in the state where the business is located.

4. Legal or Accounting Licenses: Brokers may also need to work with legal or accounting professionals who are licensed in the state where the business is located.

In summary, there are no specific credentials or licenses required to sell a stock-based business, but brokers and other professionals involved in the sale may need to be licensed or registered in accordance with state and federal regulations. It's important to check the regulations in the state where the business is located and to work with licensed professionals to ensure a successful transaction.

The decision to hire a large firm or a small firm to sell your business depends on various factors such as the size of your business, the complexity of the transaction, your budget, and your personal preferences.

Large firms typically have more resources, greater brand recognition, and a wider network of potential buyers. They may have a larger team of experienced professionals, including lawyers, accountants, and investment bankers, who can help navigate the complexities of a business sale. However, they may also charge higher fees and have less personal attention to your individual case.

Small firms, on the other hand, may offer more personalized attention and more competitive pricing. They may have a more flexible approach to the sale process and be able to adapt more quickly to changing market conditions. However, they may have fewer resources and a smaller network of potential buyers.

Ultimately, the key is to find a firm that has experience in selling businesses similar to yours, that understands your needs and goals, and that you feel comfortable working with. You may want to consider interviewing several firms before making a decision, and ask for references and examples of successful transactions they have completed in the past.

There are several factors that can make a business non-sellable or less attractive to potential buyers:

1. Lack of profitability: Buyers are looking for businesses that generate consistent profits and have growth potential. If a business has a history of losses or is not generating sufficient profits, it may be difficult to find a buyer.

2. Overdependence on the owner: If a business is heavily reliant on the owner for day-to-day operations, it may be challenging to sell. Buyers are looking for businesses that can continue to operate successfully after the owner exits.

3. Lack of scalability: Buyers are often looking for businesses that have the potential for growth and expansion. If a business is not scalable or has reached its growth potential, it may be less attractive to buyers.

4. Legal issues: If a business has legal issues, such as ongoing litigation or regulatory violations, it may be difficult to find a buyer willing to take on the associated risks.

5. Poor financial records: Buyers need to have confidence in the financial records of the business they are purchasing. If a business has poor record-keeping or inaccurate financial statements, it may be challenging to sell.

6. Dependence on a single customer or supplier: If a business is heavily reliant on a single customer or supplier, it may be considered risky by buyers, as the loss of that customer or supplier could have a significant impact on the business.

7. Industry decline: If a business operates in an industry that is declining, it may be challenging to find a buyer willing to invest in a declining market.

Overall, it's important for business owners to address these issues early on and work to make their businesses as attractive as possible to potential buyers. This can involve improving profitability, streamlining operations, and ensuring that the business is well-positioned for growth.

The top three mistakes made by sellers trying to sell a business on their own are:

1. Overvaluing or undervaluing the business: Many sellers either overvalue or undervalue their business, which can lead to unrealistic expectations or a lack of interest from potential buyers. Overvaluing the business may result in no buyers or a long sales cycle, while undervaluing it may lead to a lower selling price and missed opportunities to maximize value.

2. Lack of marketing and exposure: Selling a business requires marketing and exposure to potential buyers, but many sellers may not have the experience or resources to properly promote their business. This can result in a lack of interest from qualified buyers, which can prolong the sales process or result in a lower selling price.

3. Poor negotiation skills: Negotiating the terms of a business sale requires skill and experience, and many sellers may not have the expertise to effectively negotiate with potential buyers. This can result in a suboptimal deal structure or missed opportunities to maximize value.

Overall, selling a business can be a complex process that requires a deep understanding of the market, financial analysis, and negotiation skills. Working with a qualified business broker or M&A advisor can help sellers avoid these and other common mistakes, increase their chances of finding the right buyer, and maximize the value of their business.

EBITA is a way to figure out how well a company is making money by looking at the money it made from its main business activities. It doesn't include things like how much money it pays in taxes, how much it has to pay in interest, or how much its equipment or assets lose value over time. By using EBITA, we can compare how well different companies are doing without worrying about other factors that might make things look different.

EBITA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a financial metric used to evaluate the operating profitability of a business and is calculated by adding a company's earnings before interest and taxes (EBIT) to its depreciation and amortization expenses. 

EBITA is often used by analysts and investors as a measure of a company's operational efficiency and its ability to generate profits from its core operations, without the impact of non-operating factors such as interest expenses, taxes, depreciation, and amortization. 

EBITA can also be used to compare the profitability of different companies within the same industry or sector, as it provides a standardized metric that takes into account differences in capital structure, tax rates, and accounting methods.

It is worth noting that EBITA is not a standardized accounting measure and may not be recognized by all accounting standards or regulatory bodies. Some companies may also use different variations of EBITA, such as EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) or EBIT (Earnings Before Interest and Taxes) depending on their specific needs or industry practices.

No, it is not recommended to hire a residential agent to sell your business. Residential agents are licensed to sell residential properties such as homes and apartments, but they typically do not have the knowledge or experience required to sell a business.

Selling a business involves a complex process that includes financial analysis, business valuation, marketing, negotiation, and legal considerations. It requires a different set of skills and expertise than selling residential real estate. While residential agents may have experience in marketing and selling properties, they may not have the knowledge or experience to handle the unique challenges of selling a business.

It is important to work with a broker or M&A advisor who specializes in business brokerage and has a track record of success in selling businesses. These professionals have the necessary knowledge, experience, and network to market and sell a business effectively, identify potential buyers, negotiate favorable terms, and handle the complex legal and financial aspects of the transaction.

In summary, it is not recommended to hire a residential agent to sell your business. Instead, it is important to work with a qualified business broker or M&A advisor who has the expertise and experience required to handle the unique challenges of selling a business.

Yes, a seller is generally required to disclose all financial information when selling a business. This is because potential buyers have the right to accurate and complete information about the business in order to make an informed decision about whether to purchase it.

The level of financial information that must be disclosed may vary depending on the size and complexity of the business, as well as the terms of the sale agreement. However, in general, a seller is expected to provide potential buyers with financial statements, tax returns, and other relevant financial information that accurately reflects the business's financial health and performance.

Failing to disclose all relevant financial information can result in legal and financial consequences for the seller, including potential lawsuits and the risk of the sale being rescinded. It is important for sellers to work with a qualified business broker or M&A advisor to ensure that all necessary financial information is disclosed to potential buyers and that the sale is conducted in a legally and ethically responsible manner.

In general, it is rare for a business to be sold without full financial disclosure. However, in some cases, a buyer may agree to purchase a business without full financial disclosure if they are willing to assume the risk associated with the lack of information.

For example, if the seller is not able to provide full financial disclosure due to the nature of the business, such as a startup that has not yet generated significant revenue, a buyer may be willing to purchase the business based on other factors such as the potential for growth or the quality of the team.

Similarly, in some cases, a buyer may agree to purchase a business with limited financial disclosure if they are able to negotiate favorable terms that protect them from potential financial risks. This may include an agreement to purchase the business at a lower price, or with certain conditions or contingencies that must be met before the sale is finalized.

However, it is important to note that selling a business without full financial disclosure can be risky for both the buyer and the seller. Buyers may be taking on significant financial risk if they do not have complete information about the business's financial health and performance, while sellers may be at risk of legal and financial consequences if they fail to disclose important financial information.

Overall, it is important for both buyers and sellers to work with a qualified business broker or M&A advisor to ensure that all necessary financial information is disclosed and that the sale is conducted in a legally and ethically responsible manner.