Staying Informed

How to Sell a Business as an Individual Seller

Ok, so you want to sell your business. Would you rather sell it yourself, as opposed to contacting a Business Broker? Selling a business can be complex. Each business is different, as well as the markets they exist within. That said, if you choose to do it yourself, we are about to share the simple Steps on How to sell a Business by Individual Sellers.
 
To get started, we cannot sell a business without finding buyers. We cannot find buyers without marketing the business for sale. We cannot find buyers without determining a reasonable asking price. We cannot determine a proper valuation without getting a few pieces of financial data together. So, let's get started.
 

Determining Key Financial Numbers

We are going to determine the SDE (Seller's Discretionary Earnings). Depending on who you talk to, this number may be referred to by different titles. (e.g. True Free Cash Flow, Owner's Benefit).
 
To determine the SDE, we will need the following:
  1. Pre-Tax Net Profit: The Net Profit you report after all expenses.
  2. Depreciation: Any Property or Asset which you have purchased and are depreciating, on an annual basis. The total annual reported depreciation will be needed here.
  3. Amortization & Interest: Amortization & Interest paid by the Business.
  4. Owner Salary and Perks: Owner Draws, Incomes or Other Perks not required as a regular Expense for the Business, itself. Also any draws or perks paid to spouse or other family. In some cases, an annual country club membership or cell phone may be examples of 'Other Perks'.
 
This is a straight forward and simplified method. More complex and detailed analysis can be performed by a Certified Business Appraisers. So, here it is. The formula is pretty simple. By applying your Key Financial Numbers this formula, you will get a good estimate of the SDE (Seller Discretionary Earnings).
 
Pre-Tax Net Profit + Depreciation + Amortization & Interest + Owner Salary and Perks = SDE
 
Pre-Tax Net Profit  $_______________
Depreciation  $_______________
Amortization & Interest  $_______________
Owner Benefits & Perks  $_______________
SDE TOTAL  $_______________
 

Selecting an Appropriate Multiple

This is a judgement call and may be viewed differently by others.  Sometimes a business owner has high visions of his business and it's position, while another individual may see things a little more black and white.  Try to be honest here and select a number beside the closest description of your business.
 
Multiple Select Multiple That Best Fits
1 - 2 New or Small Business. Personal Services Business. The Owner is the only or one of the only Service Providers in the Company.
3 - 4 Established Small Business. No significant advantages. Little hard assets. Stiff competition. Heavy dependency on proper management for profitability.
5 - 7 Established Small/Medium Business. Admirable market position. Mild competition. Swings in revenue. Requires continual good management.
8 - 10 Well Established Business. Solid market position. Revenue will reliably continue without regard of strong management.

As you can see, this is not an extremely deep view or determiner of a company's multiple.  It does give a fairly close estimate, for those who are honest about their business.  For a more specific multiple, you will need to know how the multiples run on various industries and business sectors.  Often times a good Business Appraiser will work from your SIC code and select the best industry/business sector and it's multiples.  In every case, it is a judgement call, so being honest to yourself or a Business Appraiser is key.  Be aware that a potential buyer may also consider his/her view of your business situation and multiplier.

All Purpose, Simple, not Perfect but Good Business Valuation

SDE Total  X  Multiple = Potential Asking Price
 

How to List the Business

Now that you've determined a possible Asking Price, it's time to assemble a Business For Sale Listing and post your listing online.  Listen, if you want to find buyers, then you need to get your business in front of as many as you can.  Now, there you do need to consider being discrete, while reaching as many people as you can.

Discretion, Keeping it Quiet

Employees and existing customers get a little nervous when word hits the street of a business for sale.  Sometimes the competition fuels the message in order to take a bit of your market-share.  First, it is seldom a good idea to give your actual business name and address in a public Business For Sale Listing.  Save that for your Potential Buyer Packet, which you do not let out until you've qualified the potential buyer and secured an NDA.  Often a seller will list the county and state of a business for sale, holding the city and street address out for serious inquiries.  That said, you can be very creative and informative, as to the business title, description and financial data.  Also, it's a good idea to use a Contact Name, Phone and Email different from your own.  Listings of Businesses for Sale often contain contact information or provide a form to reach you.  Any personal identifiable information could be an issue.  Often an account for selling a business will need your true name and address, but that should be completely separate from the Contact Name, Phone and Email associated with the listing, if you wish to remain Discrete!

Where do you go? Go to BizLocal.com to Sell Your Business.

Visit BizLocal.com and Click "SELL" or Sell as "Individual Seller" to begin.

  1. Create a Seller Account with only a Name, Email and Phone.
  2. Enter your Listing Details & Upload an Image
  3. Select your Package and Checkout
While creating your listing, you will notice a couple key items.  Select relevant Categories.  Give it a strong title that attracts buyers.  Give it a Sub-Title/Quick Sales Pitch.  Enter as much detail as you can. Keyword suggestions are in a box, but you can add more keywords that relate to your business or product.  Keywords are important as they aid internal and external search engines.  Enter your financial information and other questions, including Reasons for Selling.
 
After completion, you will notice a Back Office link in the upper right header, giving you access to an easy Back Office suite to manage your listing.  You can manage your Account, Listings and Contacts.  An important feature is the ability to edit your listing, at any time.  You can even put it into Draft Mode, moving it from public access, if you feel you need to put more attention in the detail of it.  Also, each time your listing Card is viewed, we track it.  When it is clicked on... well that is tracked as well.  If the visitor is logged in or has an account with us, their email/username will be seen in your analytics.  The system also tracks referring url's.  This enables you to determine where your visitors are coming from.  In some cases, they may have found your business for sale from Facebook, Twitter, Google+, or a Blog.
 

Do some Self Promotion

That's right!  Now that your listing is live, you should promote it a bit.  From BizLocal's BackOffice, you can select your listing and push to Facebook, Twitter, Google+ or Pinterest.  Visit the public side of BizLocal.com and go to Buy a Business to find your business.  View it and copy the link from your browser.  You will notice a 'Search Engine Friendly' url.  Now drop that in the signature live of your email account and include in various email correspondences, or simply use it in the body of an email to someone you would like to share it with.
 
Happy Selling!
 
DISCLAIMER: The author does not provide legal, taxation or investment advise. The author provides business services, in areas of marketing, advertising, web-presence and business consulting.  
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