If you are considering selling your business or franchise online, you should read this clearly outlined information to ensure you have a successful sale. Yes, you will probably be hiring a company to help you, but knowing the tips and tricks of the business sales trade before hand, will allow you to be involved as much as possible. It is your business after all, and you want to understand everything you can in order to sell it for the most you can.

1 - What is goodwill?

This has nothing to do with donations, but everything to do with value. Goodwill is when a profitable business sells for more than its profitable assets. The value difference is called goodwill.

2 - Confidentiality

Your goodwill can be harmed by insider gossip. If employees, customers, suppliers or shareholders overhear that the business is for sale, it may create a problem. Employees start looking for other job opportunities elsewhere, customers question the standard of products or services they may or may not receive, suppliers reduce their payment terms for fear of instability in the future.

Because of these pitfalls you may want to consider keeping things confidential when forming an exit strategy and selling your business. To keep things confidential, you the seller, should hire a third party to list and advertise your business. Minimize the blatant advertising of your businesses identity, and consider screening potential buyers before you tell them who you are. Also, consider including a confidentiality agreement before disclosing anything about the business. It is important to protect the companies’ reputation and not lose any goodwill.
There are some very good business and franchise directories online which can help you with this.

3 - How do you decide on an asking price?

Your business’ financial statements are the main tool in order to decide asking prices.

If you are a large company, you should hire a business appraiser or sales firm in order to properly calculate your companies’ value and asking price. Remember you sometimes don’t know what you have until someone shows you. Reversely, thinking you have more than it is really worth, will send potential buyers running for the hills.

If you are a small company, the sale should be handled by a business broker or sales firm. They will develop and determine a reasonable as
king price by looking at more than just your financial statements. For smaller companies, a financial statements purpose is to solely reduce taxes, not show profits. In order to get a real picture of the profits, financial statements should be corrected by adding to the profits any benefits the business owner is getting from his or her business indirectly but that are not necessary for running the business. Remember, the owner’s salary, asset depreciation, amortization and interest expenses should also be added to the profits.

Once this value has been calculated you will have what is known as ‘Seller Discretionary Earning (SDE). To get a reasonable asking price, this amount should be multiplied by a multiplier.

4 - What is a multiplier?

Most small businesses sell for multipliers between one and three. The determination of these multipliers is more an art than a science. Which is why hiring a broker and an online sales firm will be profitable, they are the artists, and you have the paint.

There are many factors that affect the value of the multiplier. You should know how many years you’ve had the business. How much cash do you want for the business? How competitive is the industry? Is it a growing business? What is the quality of the location and facility? Is this business/industry attractive to potential buyers? Is the industry growing and by how much? How easy is it to replicate the same business?

For each of these questions, a rate between 1 and 4 is subjectively assigned and finally a combined multiplier is calculated based on the previous rates.

5 - Hire a good online sales firm and get yourself online

I cannot stress enough the value of hiring a good online sales firm. Whether you are selling a business or franchise, or looking to buy one; a great sales firm will guide you through the tedious tasks which will trip you up along the way. They will also have the most up to date listings and attract the best potential buyers to your sale. They know that Google rankings are very important to get your ad read and they will get your company there; as well as providing worldwide coverage and low cost advertising. A good online sales firm will get your advertisement the attention it deserves.

With this information, as well as your own research and homework, you will surely have a profitable sale. Don’t try to do it all on your own, the odds are against you. Knowing your company inside and out by following this advice will help you, and whichever company you hire; get a faster, easier and more profitable sale. Good luck.