171 – What You Need To Know Before You Sell Your Business

Today we’re joined by Kevin Hockey director of  Real Estate Agency Sales.  Kevin helps Real Estate companies to sell their rent rolls or their entire business.  He has over 30 years experience in the industry and has lots of information about how to prepare your business for a sale.  Kevin worked in the industry for many years before he set up his own company.

“I had to start my own company because I’m unemployable,” he jokes.

Kevin’s great skill is understanding quickly what state a company is in.  When he takes a business on as a client he can usually tell within the first few minutes of looking at their books whether they should be in business or not.  A person may be a great hairstylist but that doesn’t mean they’re any good at business. The same rule applies to the real estate business. A great real estate agent may not be able to operate a great real estate company.  

It’s important to recognize that profit is not a four-letter word.  Too often people feel uncomfortable stressing that to their employees.  If you’re not making a profit you’re not going to be successful. What’s worse, you won’t be able to sell the business.  Everyone within the team has a role to play. If someone isn’t performing well everyone else will have to pick up the slack.  There’s a proven method to perform at a high level in business. You ignore those rules at your peril.

The process of selling a business sounds simple but it can be quite complex.  Most businesses have a multiple applied to their profit to determine the sale price.  A broker will help you to determine what that multiple will be. In residential real estate the price is determined differently.  The price of the business is usually a multiple of the income from the rent roll of the property management side of the business.

A buyer is first going to examine the profit and loss statement of a business to determine their interest.  The next thing they will look at is whether the business is dependent on the current owner or not. Good staff with fair wages who have a demonstrated history of success is also really important to a prospective buyer.  

Selling your business is a big job that requires a lot of time and effort.  It’s not a question of whether an owner can sell their business. The question is should they.  Taking your eye of the day-to-day operation of the business in order to effectuate a sale can be hugely detrimental to the bottom line.  A broker offers the experience and knowledge that will allow you to sell for the highest possible price.

There are a number of mistakes owners make when trying to sell their business. The biggest is the owner not having a good grasp of their numbers.  What is the profit and loss statement? What is the current revenue? These sorts of numbers should be at your finger tips. A lot of people don’t even know how to get into their software program to access those numbers.  

Another big mistake is having too many cooks in the kitchen.  Everyone has an opinion when it comes to the sale of a business.  Your the one that’s put in the blood, sweat and tears so you need to talk to the right people.  One of you first calls should be to your accountant. They will tell you about potential tax implications.  A business broker should be the next call. They will tell you what the value of the business might be. A lawyer should be involved early in the process as well.  

Another error that Kevin often encounters is owners not focusing on management.  They may be fantastic at their particular skill but being a business person is an entirely different matter.  Finally, being a great marketer is hugely important.