How to Sell a Professional Service Company

How to Sell a Professional Service Company 2019-12-30T11:23:58-05:00

There are many types of professional service businesses, including staffing agencies, law firms, marketing agencies, and more. If you’re considering selling a professional service business, it’s important to do your due diligence – and work with a sales partner who has specific expertise within your industry and market niche. By doing so, you can minimize the odds of unforeseen errors occurring and help ensure a timely sale on the most favorable terms possible.

With this in mind, let’s take a closer look at the steps you need to take to sell your professional service company successfully.

Write a Detailed Business History and Guide

Prospective buyers need to know what they’re purchasing. Therefore, sellers must be able to describe what the business does and the processes and systems that are in place. By detailing all of this ahead of time, buyers will be reassured that their new company will be able to run smoothly post-transition. The more you can document about your business and how it operates, the easier it will be for buyers to ascertain whether they are a good fit.

Generate an Accurate Valuation

Every seller has the same goal – to maximize their return. However, coming up with an unrealistic valuation does little more than waste time and prevent the sales process from moving forward. Given this, it’s extremely important to develop an informed assessment that considers a few key elements.

Sellers should consider sales, profits, growth trends, business assets, intellectual property, and customer bases. However, it’s also important to considerable so-called “intangible” assets. These include your business reputation, location, the expertise of your staff, and more. These two asset categories should also be considered in the context of local market conditions. For example, how many businesses like yours are also on the market?

Understanding these variables is the key to arriving at a price that maximizes value and encourages a timely sale. However, many business sellers are unequipped to make these assessments or don’t have the time to devote to developing a valuation. In such circumstances, it often makes sense to work with a qualified business broker.

Brokerage firms handle a high volume of deal flow, and therefore know exactly how to value a business. The right broker can assess your tangible and intangible assets and make an informed assessment of prevailing market conditions.

Ensure that Your Financials Are Ready

Buyers will want two things in terms of financial data – transparency and accuracy. Sellers should make an effort to ensure the books are fully organized before initiating a sale. This may mean working with accountants or advisors to ensure that financial statements, business tax returns, and other key documents are readily available. This data should stretch back at least three to five years, or for the entire duration of your business (assuming it hasn’t been in operation that long). Buyers may also request year-to-date information, and it may be necessary to have these numbers audited and certified.

Choose a Timely Exit

You wouldn’t normally sell a house when it’s in poor condition. Instead, you’d deep clean it, apply new paint, and address any significant red flags that might dissuade buyers. Selling a business is no different. Ideally, you should explore an exit when the company looks robust, with strong sales and a diversified customer base. The latter is important because many buyers will be wary if a single client is responsible for a large percentage of revenue.

To make the business look as attractive as possible, try to boost sales about a year out from your projected exit. Additionally, you should make sure your business isn’t experiencing any staffing or personnel issues at your proposed time of exit and modernize all operating systems.

Find the Right CT Business Broker Firm

For many business owners, attempting to go it alone will place them at a significant disadvantage. Let’s take a quick look at the areas where a business owner may struggle without the guidance and assistance of a broker:

  • Sourcing Buyers – Finding qualified buyers is a core task for any transaction. Unfortunately, most business owners know little about preparing a company for sale and marketing it to buyers. The right business broker, however, keeps a database of qualified buyers and has a network to leverage when it comes time to source interested candidates. Just as importantly, the right business broker also knows how to evaluate prospective buyers. They can discern who is serious and who may be just nibbling, as well as who has the financial qualifications to close the deal.
  • Negotiating Terms – Negotiating is an art – and many business owners have little experience on either side of the table. Knowing what to ask for, when to push, and when to concede are all critical skills in terms of closing a deal. The right business broker can profoundly improve your negotiating position simply by having extensive expertise in deal-making. Without informed and skilled negotiation, you run the risk of settling for far less than what your business is truly worth.
  • Closing a Deal – Agreeing on a number isn’t the end of the road. The buyer will still need up to 120 days to perform their due diligence, negotiate a Purchase & Sale Agreement, and secure financing. A business broker can play an integral role in ensuring that deals don’t fall apart once the terms have been negotiated.

Why VR New Haven is the Right Choice

Selling a professional service business can be a challenge. However, an experienced broker like VR New Haven can make the process as seamless as possible, while helping to ensure that you receive full value.

Our 9 step sales process is designed to help you arrive at the right valuation, negotiate the best terms, and close the deal with minimal turbulence. If you want to sell a law firm, marketing agency, or any other type of professional service business, call us today to learn how easy it can be.