4 Things to Consider Before Selling Your Business
Considering selling your business? Several factors have come together to make the present a good time to think about just that. With more liquidity at the disposal of investors and buyers, financing is readily available.
The 2020s also appear to be a lively season for entrepreneurship. Many people have joined the “Great Resignation,” leaving the corporate world to pursue business ownership. Observers are also seeing quite a few entrepreneurs desiring to acquire existing businesses or expand their line of business. And some retiring baby boomers are seeking a second career — including 4 in 10 Nevada residents over age 65 who are working for personal reasons rather than purely financial ones.
Preparation helps make a sale successful
Sales activity is hot across the U.S. and in Nevada. The Las Vegas market saw 132 sales close in 2021 – holding remarkably steady, in this entertainment-centered market, from the 151 sales in 2019 . Business brokers don’t expect to see any slowdown in the near future.
If you’re ready to take the next step, our bankers suggest that you consider these four points:
1. Check in with your banker. Before you list or close a deal, consider speaking with your relationship banker. They may have valuable insights, and they are likely to be involved in a business acquisition or sale. If you are selling debt along with the business, you and your banker might discuss how credit facilities will be treated. Will the buyer assume the debt, or will it be paid off at closing? Your banker can also help assure the release of any liens associated with credit facilities.
2. Tell your story through your marketing. Business contacts or your banker may be able to recommend a business broker skilled at presenting your business’s performance and other information in a way that is most useful to buyers. Ideally, your sales package will explain the logic of the deal in a way that’s easy for buyers to share with their lenders to secure financing.
3. Price appropriately. Valuing a business today depends greatly on the industry. One way to learn about market trends is by taking a look at the BizBuySell Business-for-Sale Trends and Transaction Activity report by region and sector. What may whet the appetite of today’s Southern Nevada sellers is that the revenue multiple of Las Vegas business sales that closed in 2021 was 0.92, double that of 2019’s 0.47. And the average Las Vegas business sold for 2.27 times cash flow. Your mileage will vary depending on how well your business performed during the past few years, your EBITDA (earnings before interest, taxes, depreciation and amortization) margin and other factors.
4. Discuss bank financing with your banker. Some sellers find that well-qualified buyers in certain industries may have the option of bank financing. Or, for small businesses, products such as SBA 7(a) loans could be an option. While these loans require collateral, companies may pledge tangible assets as collateral to take advantage of the 7(a)’s longer terms and lower interest rates. Your banker can advise you about any other options you may be able to access.
Whether you’re just beginning to think about a sale or hiring a broker tomorrow, your banker can be a valuable member of your advisory team. Your relationship banker typically understands both your business and the current marketplace. Their experience can help you make a sale you’ll be proud of — and put your financial house in order for whatever comes next.
To learn more about how our bank can support you through a business sale, contact your Bank of Nevada relationship manager.