How Much Can I Sell My Company For?
When considering the sale of a company, one of the first few questions an owner is going to ask themselves is: “How much can I sell my company for?” While we would be delighted to be able to provide that exact number, making such an assessment without reviewing the financials of the company would be a rough estimate at best.
What we can say is that companies are normally going to be valued at a particular multiple of the seller’s discretionary earnings (SDE) or earnings before interest, taxes, depreciation, and amortization (EBITDA). Industry-specific factors come into play, and those multiples may vary widely. For example, used car dealerships could sell for as low as 0.9 to 1.8 times their SDE, whereas software companies can sell as high as 4.5 to 8 times their SDE.
Several other factors will impact the value of your company, starting with its financial performance. Consistent revenue, healthy profit margins, and strong cash flow are crucial indicators of value. Market conditions, including industry trends, demand, and broader economic factors, also play a significant role, as they influence the potential for future growth and profitability.
Beyond finances, both tangible and intangible assets contribute to company value. Physical assets like equipment or property, along with intellectual property, brand reputation, and customer loyalty, are also essential.
The Value of Hiring an M&A Advisor
As a company owner, you are likely versatile and capable of multitasking with many roles and responsibilities. You probably have led negotiations, managed teams, put sound business strategies into place, and worked your way through thorny problems. You possess a skillset that has allowed you to quickly adapt, solve problems, and thrive in your sector.
Given your ability to focus on goals, to accomplish nearly any given task that you set your mind to, it is understandable that you could choose to handle the sale of your company yourself, without outside assistance. However, in most situations, the superior choice is to hire a professional M&A advisor. The benefits of working with an expert often outweigh the challenges of doing it alone.
Professional M&A advisors bring specialized knowledge and experience that can help to enhance the maximum sale price of your company, handle the complications of the sale process, and avoid common pitfalls that can diminish value or delay the deal. They can also assist you through the valuation models, identify the right buyers, negotiate for better terms, and assist through due diligence while enabling you to focus on running your company.
We want to clarify that it is not always a matter of ability; it’s also about leveraging professional expertise to unlock the full potential of the value of your company while investing the least amount of time and resources into the transaction. Allow an M&A advisor to weigh in on the question of “How much can I sell my company for?”
Are You Prepared and Ready to Sell?
Preparation is key, and anything done to prepare the company for sale will pay dividends at the end of the transaction to make it as smooth and efficient as possible. Setting goals and organizing company-related documents to prepare for the sale will go a long way. Be prepared to present documents, as any potential buyer will want full access to your financial statements and other sensitive business information in order to determine the value of and the risks associated with their purchase.
Second, there are obligations that owners may want to consider beforehand: For example, there may be debt that needs to be paid off before closing or a large volume of obsolete inventory that may need to be liquidated before selling.
Lastly, plan in advance of the sale; it is not uncommon for the whole process to take longer than anticipated, from finding the right buyer to due diligence, negotiations, and closing. That sometimes means staying on board or consulting for another year after closing in order to help with the transition, offering guidance and stability during the handover period.
Failing to plan accordingly can be a problem for sellers who have time-sensitive goals after the transaction. While cooperation with a professional M&A advisor can hasten the process to some degree, one should in no way relax from planning and preparation for a long and involved process when selling a company.
Plan Your Exit Strategy with V-AID
The answer to “How much can I sell my company for?” can vary, even among M&A advisors. Unfortunately, not all merger and acquisition advisors are created equal, and many lack industry-recognized designations that can influence the level of service and results you will obtain. The selection of an M&A advisor can substantially affect the overall value resulting from the sale of your business, as the experience and professionalism of your advisor can make a big difference.
There’s even a wide range of fees due to a variety of factors, including but not limited to the size of the deal, location, complexity, and type of business. Understanding and learning the differences beforehand can help company owners evaluate potential advisors and make informed decisions.
If you are considering the sale of your business or would like to explore your options, it is important that a competent M&A advisor is selected with whom to work. Since 2001, V-AID has been committed to putting clients first, offering a team of seasoned professionals with formal training and extensive experience in the M&A space. This provides for a smooth transition and helps in structuring a successful company sale.
Get in contact with V-AID at your earliest convenience for a free consultation, and rest assured there is no pressure to sell, only the opportunity to see the difference expert guidance can make. Allow us to help you answer the question, “How much can I sell my company for?”
