How selling a trade business works.
For an owner who has never sold a business before and would like to understand it before anyone asks for a decision. No names in it, nothing to sign, and the number is always yours to set.
What a buyer is paying for
Not the trucks, mostly. A buyer is paying for the phone that rings, the customers who call back every year, the crew that knows the work, the name people trust, and your help for a few months while they learn the ropes. The equipment comes along, but the business is the part that keeps earning after you leave.
How the price gets set
Buyers of a one-owner trade business usually start from what the business earns its owner in a normal year, before the owner's own pay and the one-time things, and pay a multiple of that, plus the fair value of the equipment and any inventory. The multiple is higher when the business runs without the owner for a week, when the customers are many and small rather than a few and large, when the books are clean, and when the phone number and the name come with it. It is lower when the owner is the business. We work the figure out with you from your books and from what businesses like yours have sold for. You set the asking price.
How long it takes
A quiet listing to a signed purchase agreement commonly takes three to nine months. Closing follows when the buyer's financing is in place, which for a small business is often a bank loan backed by the Small Business Administration, sometimes with the seller carrying part of the price for a year or two. You keep running the business the whole time, and most buyers ask you to stay on for sixty to ninety days after closing.
Who does what
- You keep running the business, gather the last three years of tax returns and a list of equipment, and decide which buyers you want to meet.
- We prepare the listing without your name on it, find buyers, obtain a signed confidentiality agreement from each one before they learn who you are, screen them for money and fit, introduce the ones you approve, and help both sides reach terms.
- Your attorney writes or reviews the purchase agreement. Your accountant advises on the taxes, which depend heavily on how the sale is structured.
- The buyer's lender appraises and funds. Your landlord, if you rent, agrees to a lease with the buyer. We do not sell buildings or leases.
What it costs
Our fee is five percent of the sale price, paid at closing out of the proceeds. Nothing is owed before that day, and nothing is owed if the business does not sell. The buyer pays us nothing. Your own attorney and accountant bill you directly for their work.
What stays private
The listing shows the kind of business, the area, the numbers and what comes with it. Your name, your address and your business name are shown only to a buyer who has signed a confidentiality agreement and whom you have agreed to meet. Your employees and customers hear it from you, when you choose.
What usually goes wrong, and how to avoid it
- Books that cannot be shown. Cash that never hit the bank cannot be sold. Start running everything through the books a year or two before you want to sell.
- A business that is only the owner. If every customer calls your cell, start handing the phone to someone else now.
- Waiting too long. A business sold while it is still busy brings a multiple. One sold after the owner has slowed down for three years brings the equipment price.
- Telling the crew too early. Good people leave when they hear rumors. Tell them when there is a signed buyer and a date.
This page is general information, not legal, tax or investment advice. Every sale is different; your attorney and accountant advise on yours.