San Antonio business owners have turned to the brokers and professionals at Sell My Business San Antonio for nearly 15 years for assistance in preparing their business for sale, and successfully achieving the purchase price they desire. We are ex-business owners, accountants and advisors who are experts at business valuation, financial recasting, and marketing a business for sale. If you are curious about how fast you can sell your business or how much your business is worth, our partners can help you. Call our offices and schedule a free consultation with our San Antonio business brokers to go over the challenging, but ultimately rewarding process of selling a business.
How do I sell my San Antonio-based business?
For years, perhaps decades, you have built your business up from nothing. It is profitable. You serve your customers with pride, and treat your employees well. That is very difficult to achieve. Hopefully your business produces a healthy profit each year. If so, it will be easier to sell.
Typical business owners are unsure about the process of how to sell their business. After all, selling a business is very different than running a business. Questions beyond just how to do it, but those like where will I find buyers? How much is my business worth? Is it risky to divulge information to potential buyers who might use it to compete with me? Can I sell my business for cash? Can I sell my San Antonio business online? Should I hire an attorney to help with the sale of my business?
These are all valid questions that we can help you answer. First, they illustrate why it is difficult to expect a business owner or entrepreneur who has built a successful business to automatically know how to go about selling it. And it belies the fact that selling a business can be a full-time job. From preparing the marketing materials necessary to announce and promote the potential sale, to fielding interest from potential buyers and verifying their viability as new owners, the process can take several months or even a year. This is why it is valuable to work in partnership with a business broker or M&A advisor like our group at Sell My Business San Antonio.
The Process of Selling Your San Antonio Business
Selling your business is likely to be one of the largest transactions of your life. Businesses in the lower-middle market, those that produce a net profit anywhere from $100,000 to over $2 million, typically will sell for a multiple of net income of three to six times. This means a purchase price of anywhere from $300,000 to north of $10 million for the best and most profitable businesses in a growing industry. That’s how it can become the biggest transaction of your life.
The process of selling your business begins with your decision to pursue a sale. If it because of health, age, timing, or simply a desire to cash out and move on, the reason is your own. Once you have decided to test the waters and pursue a sale, you would likely begin the process by engaging an advisor like a business broker. There is a lot of prep work to be done before going to market, and its best to choose your advisor early in your own timeline so you are not rushed to get out in front of buyers. Groups like ours are very experienced in helping business owners prepare for a sale.
We begin by working with you and your accountant to collect your financial statements. Potential buyers are going to want to review the financial performance of the business over the past several years. It is helpful if you have kept clean financial statements and have CPA-prepared or at least CPA-reviewed tax returns dating back at least three years. The trajectory of your business over the past three years is what buyers are going to have the most interest in reviewing. Pull together your balance sheet, your recent income statements, any statements of cash flow and accounts receivable and accounts payable, and go through them to highlight any points of interest. It is also important to prepare a list of your top customers and top suppliers. Any concentration amongst your customers and suppliers will be scrutinized and buyers will want to know the nature of those relationships.
Why does customer concentration matter? We had a client in the jewelry business who sold wholesale to retailers across Texas and other southern states. The client had one big customer who accounted for over 50% of their yearly sales. After we received an offer on the business, during due diligence, the client’s customer declared bankruptcy. This instantly wiped over 50% of their revenue off the books going forward. Suffice to say, the business lost a lot of its value. This is why potential buyers will want to review customer concentration. It is a big risk when they are laying out what amounts to several years’ worth of profits in advance to purchase your business.
The Next Step to Selling Your Business
Once we have helped you gather all of your financial statements, we will work with you to “recast” these financials to arrive at adjusted EBITDA (earnings before interest, tax, depreciation and amortization). This figure is meant to portray the true “owner benefit” produced by the cash flow of your business each year. To better explain, think about how you (likely) run your business to minimize your taxable income and to take advantage of pre-tax income by running personal expenses through the business. Even if that is not the case, it’s important to recast your financials and arrive at an EBITDA figure that is adjusted because maybe you pay yourself an above-market salary and a replacement could be hired to fill your role for much cheaper. Failing to recast would mean you miss out on a multiple of value that is three to six times the difference of this money in your eventual purchase price.
After recasting your financials, we will prepare what is known as a confidential business review, or CBR. This CBR is a marketing document that is about 20 pages in length and explains all the important high points about your business. It is the document that we will share with potential buyers after they sign a nondisclosure agreement, or NDA. The CBR will contact sections including:
- History/Background of the Business
- Owner Profile
- Company Organization Chart
- Key Employees
- Key Customers
- Key Suppliers
- SWOT Analysis
- Product or Service Description
- Recast Financial Statements
How Will I Find Buyers for My Business?
With the CBR completed, if you have chosen to work with a professional business broker like our group in San Antonio, we will immediately begin researching potential buyers for the business. This means starting with our existing list of contacts amongst investors, bankers, entrepreneurs, private equity investors, as well as potential strategic buyers that may be in the market. We will review the list with you at your discretion, and then begin our marketing blitz. Emails will be sent giving a brief description of the opportunity, likely to include your business industry type, age, rough annual revenues and net income and purchase price.
Business listing websites like BizBuySell.com and others that are specific to the San Antonio area, or even your specific industry, will be contacted and a listing will be created to advertise the opportunity for sale. Most business owners do not know that there are specific marketplaces both online and off that are frequented by investors looking to buy their next business. We keep a close watch on these websites, and have access to post on them on behalf of our clients.
How Much Will My Business Sell For?
Buyers will have the opportunity to inquire about the business and speak with your business broker first. The broker acts as an intermediary to answer any initial questions, vet buyers and their financial capabilities, and only afterward to connect the buyer with the selling client. We will administer phone or in-person meetings with potential buyers, giving them the opportunity to speak with you directly and to ask questions about the information in the CBR and more. At this point in the process, expect to field several phone calls lasting at least one hour answering questions about the business and about your motivations behind selling. Buyers can be skeptical of the prospects of a business to continue to perform once the owner has moved on. They also have a tough task of verifying if the conditions surrounding the business and your industry are likely to continue positively or if there is some change headed down the pike that will hurt your revenues.
Buyers who want to move to the next stage will then submit an indication of interest (IOI) or full letter of interest (LOI) for our review. These documents will indicate a price, terms, and timeline for selling your business. It is up to you to decide which offer you want to accept. Once an LOI is accepted, the parties move into due diligence. Due diligence can last anywhere from 30 days to 3-4 months for larger deals, during which time the buyer will do a much deeper review of your business, employees, inventory or products, financial statements, and they will plan a transition period with you. If nothing comes up in due diligence to change the deal, the transaction closes when the buyer funds escrow and gets you the money.
This description of how to sell your business is only a brief overview. If you would like to learn more, please contact our team at our offices in San Antonio by contacting us through the website here or calling 210-760-9800.
Sell My Business San Antonio
8000 Interstate 10 Frontage Rd
San Antonio, TX 78230
Office Hours: Monday-Friday, 8:30am-6pm Central Time