Thinking of Selling Your Business?

April 25, 2023  |  Barton Walter and Krier

Are you thinking of selling your business but don’t know where—or when—to start? We can help. Barton, Walter & Krier provides Transaction Advisory Services to help clients understand the sell-side process basics when the time comes. Keep reading to learn more about how we can help make sure you’re a prepared seller.

Value-Added Service

“I think there’s a lot of bad advice that gets thrown around out there, and we want to make sure people get proper advice,” said Blaine Andersen, Managing Director of Transaction Advisory Services (TAS).

Andersen is BWK’s foremost authority on TAS, a value-added service that helps ensure our clients have the information they need to make sound decisions on either side of a transaction. For the purposes of this blog, we will focus on the sell-side process.

Knowing the Company’s Financial Health

One of the most important things people should be aware of before starting the selling process is the financial health of their company. And fully understanding the business is key.

“I think every company is a little bit different,” Andersen said. “But the roots of it all are very similar in that you try to understand where and how they’re making their money.”

Andersen suggested recognizing and analyzing financial elements including:

• Adjusted EBITDA — are the adjustments appropriate and the support reasonable and defendable?
• Gross margin, variable/contribution margin, and EBITDA margin profiles
• Working capital and indebtedness profile
• The details and nature of capital expenditures

Walking through the general cash flow life cycle — income statement, balance sheet/working capital, and investments/capital expenditures — is often the best place to start, Andersen noted. He also pointed out that it’s important for sellers to truly understand their business and its story, so they are aware of how other investors see it.

“Being truly aware of and fully understanding your business’s financial health helps ensure that what the seller is presenting to potential buyers is accurate,” Andersen added.

Questions to Ask Yourself

Sellers also need to be cognizant of personal concerns when it comes to making the decision to sell. They need to be comfortable with the idea of parting with their business and doing it for the right reasons, whatever those may be.

As Andersen pointed out, selling your business isn’t something to be decided overnight. As a seller, you want to think about:

• Are you ready to sell the business?
• What type of buyer would you sell to?
• How much do you need to get for your business?
• What amount do you need for your retirement?

“As much as it’s a hard-numbers deal,” Andersen said, “there are a lot of softer components that go into this decision, too.”

Any sale, especially that of a business, involves extensive forethought and planning. Which is also why the BWK team prefers to connect with potential sellers about two or three years prior to the sale, Andersen added. That timeline gives BWK a chance to get to know you and your business to better balance objectives with financial and market considerations for maximizing value.

Starting the Process

When someone consults with BWK to sell their business, the initial conversation is more of a discovery session. “We get to know each other a little bit better,” Andersen stated. “A lot of times they’re already our clients, and we’ve already skipped past that.”

That first meeting is a chance to find out from sellers:

• What are their goals?
• What do they want to do with this business?
• What is the timeline they’re looking for?
• Do they understand what various sale processes look like?
• Do they understand the various stakeholders in a sale process?
• What are they looking for in an ideal deal team?

Andersen also suggested being equipped with any financial statements, detailed financial records, and tax returns. “Every company runs differently,” he said. “And every company has its own story. We try to help them unlock the story a little bit, so we know who we’re working with and what we can expect.”

Most Important Takeaways

Perhaps the most important thing, Andersen said, is that sellers understand their business — in every capacity. “Inside and out,” he said. “I don’t profess to come in and say that I know their business better than they do. But I may shed some light on it and that may change the narrative of how they think about it.”

And because of the power of information, he also advised against sharing too much too soon — and to know what you’re sharing and why. “You can always provide information down the road,” he said. “But you can’t retract it. So, the main thing is to just be careful with what you’re sharing.”

BWK is Here to Help

If you’re thinking of selling your business, there are a lot of elements to consider and questions to ask before you even get started. But the trusted team at BWK is here to help. With our Transaction Advisory Services, you’ll know you have someone in your corner, looking out for your best interest throughout the sell-side process. Contact us today to learn more.