Should You Sell Your Business on Your Own? (FSBO)

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tend to either underestimate or grossly overestimate the value of their business. For those FSBOs who had no trouble at all and sold their business within months of offering it for sale, chances are they sold their company at thousands of dollars below what it was truly worth. If the deal was not structured properly, they may unwitting leave themselves legally exposed, an oversight which may come back to haunt them in the future.  FSBO’s who are unaware of the true value of their business run the risk of selling their company to a bottom-feeding buyer who will utilize great negotiation tactics to obtain favorable terms and a great purchase price. This wise buyer did not want to give the business owner time to realize he was selling the golden goose! After shrewd negations, a take it or leave it offer was made, the business changed hands, and the new owner laughed all the way to the bank.

Then there are those FSBOs who languish on the market with businesses offered for sale at twice the actual value, wondering why no buyers are showing up to knock on their doorstep. In the meantime, the employees start to leave, one by one, worried about the impending sale, or non-sale, worried about job stability, about new management, etc. The owner is putting so much time and effort into the sale of their business that the business itself begins to suffer, revenue declines, morale suffers, and overall company value drops even further. Not a good plan for selling a business.

What Is Your Business Worth?

Is Your Business Worth as Much as You Think?

As a successful business owner, you know that your business has value. It likely supports the lifestyle you and your family live. It provides a paycheck and perhaps benefits to the people you employ. The products or services you provide are meaningful to your clients.

But if someone asked you, “How much is your business worth?” could you confidently provide a dollar amount?

Many business owners aren’t exactly sure what their businesses are worth. More commonly, 90% of business owners overestimate the value of their businesses, based on rules of thumb, comparing what outwardly similar businesses have sold for, or simple gut feeling. Less commonly, owners undervalue their businesses for the same reasons.

But one thing is clear – failing to know what your business is worth right now can have negative consequences for how you plan for the future of your business and your future.

Why is knowing the value of your business today so important?

Knowing Your Business’s Value Can Guide Growth

business worth and valueA business’s value can be indicative of how well (or whether) it’s growing. While factors, such as gross sales and cash flow, play an important role in determining business value, they aren’t the only factors.

For example, if your business’s yearly cash flow is around $3 million, and the equipment and property the business owns is worth $1 million, you might assume that the business’ value is around $4 million at the low end.

However, if your business’s cash flow results from two or three big clients, potential buyers may value the business below $4 million due to the risk of large losses if one of those clients leaves after a sale.

Likewise, if you as the owner are the primary reason for strong cash flows, a potential buyer may reduce their assessment of the business’s value to reflect the cost and risk associated with you leaving.

This is because if you were ever to leave the company, whether by choice or chance, revenue and cash flow can decrease or cease. Even if you never intend to sell your business, its value is primarily based on what qualified buyers would be willing to pay for it.

In short, knowing what your business is worth right now – as a consequence of what you’re currently doing – can help you determine which areas of your business can improve to allow you to pursue your growth goals. Growth relies on numerous factors, some of which aren’t as obvious as hard numbers like cash flow.

Awareness of these less obvious factors can get you thinking about and acting on strategies to potentially strengthen them in your business. This  can help guide your business toward the growth you desire.

Why Do I Need a Business Broker or Advisor?

–  You must keep the sale confidential!
–  You want to get the best price.
–  You need quality representation (Pro athletes understand this!)
–  The selling of a business is a very complex process.
–  Most successful business people are not exposed to the selling process.
–  Business owners in general do not have the time!

Why should I use LGI Business Advisors?

–  We keep the sale confidential
–  We have thousands of buyers

–  We have over 30 years experience.
–  We create competition for your business.
–  We have a huge internal marketplace for business sales.
–  We establish the right selling price.
–  We utilize a worldwide network to advertise your business.
–  We spend more money on advertising than anyone in our industry.
–  Let LGI Business Advisors do the work for you. You need to run your business.
–  We’ll maximize the selling price of your business.
–  Our goal is always to obtain the best deal for each client.