You have devoted your time, money, and energy to building, running, and operating your business. It may well represent your life’s work.
Yet, until business owners experience a merger or acquisition, few will know what to expect or how to proceed. In the lives of entrepreneurs, few events are more emotional or significant than selling their business.
If you have already decided that now is the right time to sell a business in Los Angeles or the surrounding areas, you will want to secure the best professional guidance possible.
When it comes to selling for the maximum price and optimal terms, working in tandem with Keystone Business Advisors can make the difference.
On this page, we have outlined some of the most common topics and questions brought to us by sellers. If you have any questions that are not covered on this page, please contact us directly.
Every business owner should have an exit plan. Ideally, we recommend you start planning two to three years in advance. Advance planning will involve looking at your business through the lens of the buyer. We recommend that you work with an M&A advisor who is familiar with your industry and who can provide you an assessment of value. Through the valuation process, your M&A advisor should be able to provide you suggestions for key areas to focus on to enhance the value and marketability of the business so that you are prepared when you decide to sell.
The first thing to keep in mind is that the vast majority of buyers want to buy cash flow. Sit down with your accountant or bookkeeper and begin to get your financial statements in order, with cash flow being the order of business.
Most buyers will look at the profit and loss statement or tax return, as well as owner or family compensation. They will consider any excess compensation to employees and family. Buyers will also look at large, one-time expenses such as a new computer system or remodeling. They will also consider non-cash items like depreciation and amortization. Interest expenses will be reviewed, as will owner prerequisites. These are items that an M&A advisor or business broker in Los Angeles will consider when advising a selling client on a selling price. While Keystone Business Advisors does not refer to itself as a business brokerage firm, we handle everything a business broker would and much more. We assist our clients with valuations and making the necessary preparations to achieve the optimal price when a business is sold.
The ideal time to sell is when your business is performing well, both operationally and financially. You should actively start the process at least one to two years before you want to complete the transaction. It usually takes between 6 to 12 months to sell a business in Los Angeles, not to mention that you may be required to stay on for a transition period. Depending on the quality of your financial records, management team, and systems in place, it may take a year or more to properly position your business for sale. The optimum time to sell is before you are forced to do so by health or financial reasons. This places you in the strongest negotiating position.
The most common question our sell-side clients have when they are considering a sale of their company is “What is my business worth?” Our valuation process starts with reviewing your profit and loss statements, balance sheets, tax returns and other financial data for the past three years. Next, we recast the financial statements to adjust for any discretionary or nonrecurring expenses or income that should be added back to the bottom line to determine your company’s free cash flow.
Once the review and recast of the financial data is complete, we access business sales comparable data for similar businesses to obtain a benchmark for determining value. As different types of businesses have their own unique valuation parameters, this process goes beyond just reviewing comparable sales.
Lastly, we take into account a myriad of essential factors including your industry, competitive advantages, diversity of your customers, current industry trends, company assets including value of facility and equipment, capital investment requirements, financial data, and caliber of your staff and management team. We take all of the above into account to determine the most probable selling price for your business. We do not stop with delivering you a number; we provide and educate you on the details for how we got there.
To maximize your price, you need a steady record of profits, hard assets on your balance sheet, a proprietary product line or a strong market position, and backup management that can run the business in your absence.
Good accounting records are one of the most critical tools in maximizing value. Most offers don’t appear out of the blue; they must be solicited. Discretion and confidentiality are imperative.
Although employees and competitors may be buyers for a business, they often pay lower prices than third party buyers. While most business brokers in Los Angeles and the surrounding counties will be willing to advertise your company’s sale online, Keystone Business Advisors goes a step beyond. We work closely with you to develop a customized marketing plan while maintaining strict confidentiality. We also develop a 20 to 60 page Confidential Information Memorandum (CIM) that provides buyers a thorough overview of your business.
If it becomes known that a business is for sale, it can be destructive to the relationships the business has in place with its employees, creditors, suppliers, competitors, and customers. Weakened relationships can deteriorate a company’s position and, thereby, make it less valuable. In order to help maintain confidentiality, we require that all buyers sign a confidentiality agreement and submit a buyer profile prior to releasing any confidential information about your business. Only a limited amount of information should be disclosed until it has been determined if the potential buyer is either legitimate or capable of completing the transaction.
Generally, the best thing an owner can do is manage his business profitably while engaging an experienced intermediary to prepare a presentation package, screen prospective buyers, negotiate and evaluate offers, and perform the myriad of other necessary tasks associated with the selling process. In addition, an outside party brings objectivity and can act as a buffer between the buyer and you. Keystone Business Advisors only takes a fee based on a successfully completed transaction. Therefore, there is no financial risk involved in working with our firm.
When you are looking to sell a business in Southern California, it is a time-consuming and difficult undertaking. When owners try to sell their own businesses, they may find themselves distracted from their most important responsibility which is running the business. If the sale is not handled properly, the process can irreparably damage the business. What if competitors, suppliers, customers, and employees find out that the business is for sale?
We believe experienced, professional expertise is necessary to sell a business. Inexperience can be a terrible handicap in such an important endeavor. For the process to work, potential buyers need to first be identified and then qualified before any information about the business is disclosed. After presentations are made, the buyer needs to be contacted for a follow-up discussion. An owner working directly with a buyer may weaken his or her negotiating strength. A third party is useful because of the relative objectivity and experience provided, especially when the process gets delicate.
Keystone Business Advisors has extensive experience, references, and a pool of qualified buyers to efficiently and effectively sell your business. Our team of M&A advisors is comprised of either top executives or those who have all owned their own businesses. That means we have been in your shoes and can relate firsthand to your concerns and objectives.
If you are considering selling a business in Los Angeles or are searching for business broker Los Angeles or investment banker Los Angeles, call Keystone Business Advisors for a confidential, no cost, no obligation appointment and interview. We will explain our services, our fee structure, what your business is worth, and if we feel we can help you.