How many of you have gone through the process of selling a house? I would imagine almost all of you.
How often have you sold a business?
A business doesn’t just sell itself. You know that by now. What makes it attractive to buyers?
Let’s look at a few definitions you’ll need to know as you prepare to sell.
Enterprise Value: your business’s total and actual value based on several metrics. The buyers will look closely at this number, how you arrived at it, and whether they agree with it.
EBITDA: This is an acronym for Earnings Before Interest, Taxes, Depreciation, and Amortization. This standard is quite useful when comparing businesses with different capital investments, debt, and tax profiles.
Multiple: this is a specific term used in business valuation. It is a financial measurement tool that compares two financial metrics as a ratio. An exit planning advisor will compare the value of your business to EBITDA as a multiple of earnings.
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WHAT IS YOUR EXIT STRATEGY?
To sell your business, you need to consider all the pieces:
Enterprise Value
Revenue—gross from sales
Profits—Revenues less expenses
EBITDA
Multiples
Employee retention
Businessworthiness: Is the business owner too much of a
part of the everyday operations?
Is the buyer going to keep your employees? If there is a
redundancy of positions, what’s going to happen to your
employees?
Do you have pristine financials? A buyer is going to go
over them with a fine-toothed comb.
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