By: Kelly Bond, Davis Mergers & Acquisitions
If you look around any industry convention, conference, meeting, etc. You will notice a lot of the business owners may look… well, familiar. Many started their security businesses in the 1970’s and 1980’s when the security industry services expanded to include not only physical security but also electronic surveillance and alarm systems. Many of these familiar faces have had great careers operating a successful security business. As it is in any industry, however, the “baby boomers” are looking for their day in the sun and are increasingly looking to sell their businesses.
Their timing may be perfect as the buying pool is deep and our resilient industry is once-again weathering the down economy. The question “Is the timing right to sell my business?” may not be answered by whether there are willing buyers. A better question may be whether your business is ready to be sold.
Selling a company is a significant milestone that requires careful preparation and strategic planning. Most sellers only do it once. As business owners contemplate this big step, they must assess their company’s readiness as it is crucial to ensure a smooth and successful transaction.
Most business owners know it’s important to have proper contracts, strong reporting and excellent operations to present to buyers, but there are several other key factors to consider. Although these factors are generally not front-of-mind, they are crucial details to determine if your company really is ready for sale.
Business Performance Financial Health:
Is your business profitable? Potential buyers are more likely to pay a premium for a business with strong financials. Growth Trends: Is your business growing? A business with upward sales and profit trends is more attractive to buyers. Operational Efficiency: Are your operations streamlined? Efficient operations can make your business more appealing and present an easier transition to new ownership. Areas of Risk: Do you have a few customers who make up most of your revenue? Will the business, and particularly these large customers, withstand your absence? Plan early to mitigate any risk that you can.
Consult with Professionals Business Broker:
Consider hiring an industry broker (I can recommend one group in particular) who can provide insights on market conditions, identify potential buyers, assist in negotiating a sale and support all efforts throughout the sales process. Financial Advisor: Consult with a financial advisor to understand how the sale aligns with your long-term financial plans.
Business Valuation
Professional Valuation: Have your business professionally valued to understand its market worth. A valuation will give you a benchmark and help you set realistic price expectations. Multiples: Understand the multiples being paid for similar businesses in your industry (both of RMR and Ebitda). This can help you gauge if the current market is favorable.
Tax Implications
Tax Consequences: Understand the tax implications of selling your business. Consult with a tax advisor to plan for capital gains and other taxes, especially if you are a C Corporation, prior to putting your business up for sale.
Personal Goals and Readiness
Life Goals: Consider your personal and financial goals. Are you looking to retire, start a new venture, or need a liquidity event for personal reasons? Emotional Readiness: Are you emotionally prepared to let go of your business? This can be a significant change, especially if you’ve invested a lot of time and effort into building it. This question is extremely important when considering a succession plan.
The timing to sell your business is right when your personal goals align with favorable market conditions and your business is in a strong position both financially and operationally. Carefully assess each of these factors and seek professional advice to make an informed decision and as always, contact Davis Mergers & Acquisitions Group to assist you through the process.
Kelly Bond
Kelly Bond brings over twenty-five years of industry experience to her clients. Newly inducted into the Security Sales and Integration Hall of Fame in 2024 at ISC West, she currently serves as Partner with Davis Mergers and Acquisitions Group, representing buyers and sellers of Alarm and Integration companies.
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Source: davismergers.com