Thinking of Selling Your Business Soon ?
Here Are Some Key Buyer Considerations
By Jennifer Mailhes , CPA Managing Director , Doeren Mayhew Capital Advisors
Deciding if it ’ s the right time to sell your business is never an easy decision to make but is a consideration to always keep top of mind should an unexpected opportunity arise . As investment bankers , we often see business owners approached by a potential buyer , however , the business is not prepared to provide key information buyers are immediately hoping to gain access to . In today ’ s uncertain economic climate , we are seeing , and expect to see , more unsolicited offers from buyers looking to make strategic acquisitions .
What Buyers Want to Know To help ensure you ’ re prepared should you be approached , consider these key areas buyers will analyze when valuing a business interest :
• Financial information . This is a no-brainer . Buyers will want to see the financial health of your business . Be prepared to supply information such as your annual financial statements , monthly financials , non-operating expenses and one-time events . Non-operating expenses and one-time events are typically costs from activities indirectly related to your company ’ s day-to-day operations , such as interest payments , lawsuit settlements , write-off of assets and natural disasters , to name a few . Quality monthly financials are key to buyers because it provides them with useful decisionmaking information , such as earnings and expected cash flow , which can either drive or derail their decision to move forward with a transaction . Ideally , you should have at least the last 24 - 36 months of information prepared from the most recent month ended . We encourage you to enlist a trusted CPA to help ensure your financials are upto-date and you fully understand the information .
Also be sure to have a clear understanding of your earnings before interest , taxes , depreciation and amortization ( EBITDA ), which is what buyers use to measure the overall profitability of a company . Working with an M & A advisor before entering the market to sale can be helpful becuse they will work with business owner to help “ normalize ” or adjust their EBITDA calculation . Typical EBITDA adjustments include owner salaries and employee bonuses , any personal expenses by owners and one-time expenses .
• Value drivers . To help increase your value , it ’ s important to understand how hypothetical buyers would perceive your business operations . Some key value drivers buyers are specifically evaluating in today ’ s market include :
8 VIEWpoint Issue 2 | 2022