5 Things You Should Know About Selling Your Business
In this video, Matt reacts to this business owner’s “lessons” she learned from selling her business. Watch to see if Matt agrees with the 5 lessons. If you’re looking to sell your business now or in the future be sure to watch!
There are tons of people out on social media giving business advice. Some of it is good advice, but most of it isn’t good. In this series watch CapForge’s owner react to different advice videos. He’s an expert in all things business and has 20+ years of experience under his belt. Some of the things he reacts to might even surprise you!
Video Transcript:
Business Advice Video:
This is what I learned from selling it for multiple six figures first. To actually sell a business it is very much ideal that you have all of your income and expenses recorded on some sort of ledger. Having your financials recorded on paper is a foolproof way of getting your business valuated. If you’re taking cash in your business and you’re not recording it then you can actually prove it. Second is that people are willing to pay more for your business the less you work in it. The third thing I learned is just to focus on actually building the business itself. People will actually come to you and notice what you’re doing.
Matt’s Review:
First yes, as a business owner, you should be keeping good books. And that’s whether you’re planning to sell or not. If you are taking cash in your business and not recording it, you can do that, but when you go to sell you’re not gonna get credit for that cash. So my suggestion is if that’s how you run your business, a year before you decide you’re ready to sell, stop doing that and start putting all that cash in the business to make it look better to get credit for that cash that you otherwise were taking home and not counting. She’s correct. You don’t get credit for you when you sell but having it on the books is going to allow you to get credit for it and get a better price for your business. Much more than the amount of tax that you’re gonna pay on that cash that you’re now disclosing. But having on paper? No. Have it on a good digital accounting system like QuickBooks or Xero if that’s what you use. Do it correctly or make sure it gets done correctly every month, on time, accurately. Then when you go to sell your business you’ll be in great shape to prove to a buyer what the business is actually worth. She’s also correct in that people will pay more for businesses that can be run absentee or semi-absentee versus businesses that require the owner’s entire full time. People would rather buy a business that will spit off cash without them having to work in it. Then where they have to quit their job to go run this new business that they’ve acquired. Which they might not have the skill or the interest to do it. Just shrinks your buyer pool when you have to be actively involved full-time in the business. So building up to the point where you’re only part-time or mostly absentee is also a great thing to do. And then her third point. she didn’t know she could sell her business but then what she was doing was preparing to sell the business? So I’m a little confused about that. Finding a strategic buyer generally will get you the highest price. Versus finding a general buyer who’s just looking to buy a business that has no connection to that industry or nothing to synergistically add that business to. Sounds like she found somebody who was a good fit for the business. They came to her and they increased their offer until it made sense for her to say okay to a multiple six-figure offer. Just say what it was. Hmm, multiple six figures. But anyway. So I think she’s got some good points. If you’re thinking about selling be strategic about it. Be long-term thinking about it. Have good books and records. Work your way out of the business to get a higher price. And then find the best strategic buyer to sell it to, to get the highest price. If you do all that you can have a very nice exit. If you have questions on that or need help on that, happy to chat.
