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How much should I sell my business for?

Here are several crucial high-level tips for those looking to buy a business:

Tip 1: Act Fast From my experience, the best business opportunities don’t stay on the market for long, often going under contract or receiving a Letter of Intent (LOI) within the first few weeks. If you find a business that interests you, promptly conduct your pre-LOI due diligence. If the business shows potential, submit an offer that includes a due diligence period and an exclusivity clause. This approach gives you the chance to secure the business while retaining the option to withdraw if necessary.

Tip 2: Finance Rather Than Pay Cash I recommend financing your purchase instead of paying cash. Banks conduct their own underwriting and valuation of the company, providing an additional review to identify any major issues and ensure the valuation is accurate. However, don’t rely solely on the bank’s process; conduct your own thorough due diligence.

Tip 3: Find the Right Advisors Having experienced advisors (lawyers, CPAs, etc.) is crucial. For instance, an attorney who handles business transactions infrequently might overlook important details or create unnecessary obstacles, potentially derailing the deal. Similarly, CPAs may not have experience in business sales, so their valuations should be taken with a grain of salt. Look at comparable businesses in the market for more accurate valuations.

Tip 4: Choose the Right Bank Not all banks are alike. Large banks like Wells Fargo, Chase, or Bank of America have stringent guidelines and limited industry comfort zones for business acquisition loans through the SBA 7a program. Smaller banks often offer better rates, are willing to lend to a wider range of industries, and provide a more personalized review process.

Tip 5: Get a Pre-Approval A pre-approval is valuable, especially when there are multiple offers on a business. As a business broker, I advise my clients to favor offers with pre-approval and proof of funds. This demonstrates the buyer’s seriousness and qualification, saving time and ensuring a smoother sales process.

If you have any questions about business valuation or the buying process, please feel free to contact us. We are a Colorado-based business brokerage firm specializing in business sales. – Best regards, Jessica Clark,  Business Broker at Southwest Business Brokers.