I want to sell my company, but I do not have the revenue or net income
- How do I sell my company when I don’t have enough revenue or net income?
- How do I get the valuation that I deserve?
- Can I even sell my company?
- Does anyone want my low-net income company?
The answer is YES.
Someone will tell you that you can sell anything.
Yet you know that you need to first:
- Grow the company more
- Get to profitability and then…
- Have more net income to….get what you deserve
You can sell your company with even zero Net Income.
- Do you have revenue that someone else would want?
- Do you have future revenue?
- Do you have some competitive edge that your competitor might want?
- Do you have some intellectual property?
- Do you have some marquee accounts that another company could benefit from?
What you need is an EXIT Strategy?
How do I go about selling my company?
Many articles on the internet suggest that you find a business broker or an investment banker. Some steer you toward a Private Equity (P/E) firm.
The 1st question you need to answer is…
Why are you selling your company?
Do you just want out maybe because you are ready for retirement?
Do you have intellectual property and want to sell it?
Maybe your health is failing and the company needs you to operate.
Some just want to sell part of their company to get some cash and then keep the other part, the remainder so they have something to grow.
There are many reasons why people sell believe it or not.
Are you selling because you want an EXIT or not?
All serious buyers will want to know the goal of the owner upon an acquisition.
Annoying and Distracting “buyers”
You likely get email after email every day asking you if you want to sell your company. Who are these people?
Some of these emails even point out specifics to your offering…such as…We have a buyer of solutions just like yours that are cloud-based solutions, etc, etc, etc. Then when you talk to them you realize that they are full of $%#@BS …you know what.
Then there are the companies, that seemingly are large and credible, that offer these ‘very important to you’ seminars in your market. They offer an educational series that is designed to provoke you based on some high valuations that others received selling their company.
When they have too many layers to go through to talk to someone that can actually champion your cause….run. Some have you talk to a telemarketer, then a biz dev guy, then someone else, before you ever talk to a so-called account rep that isn’t even a broker. Just too many layers. Yes, they will sell your company. Kinda reminds us of the auctioneer that comes to your mother’s estate and states “sure, we will sell everything…” Yes, they will, but for pennies on the dollar.
Most business brokers cast a wide net. They take your information and candy coat it a bit, add your financials and then cast it out there for people wanting to buy a business.
Most business brokers will advertise your business on a match-making site.
- Are you looking to buy a manufacturing company?
- Are you looking to buy a job, your last job?
- Are you looking for a company that affords recurring revenue?
- The Owner is retiring to Florida and selling his company.
Most business broker sales allow the owner to retire and leave after some transition period. The EXIT. Yes, but for what price?
The No-Look Sale
Some don’t even go pursue a buyer, they partner with strategic partners and then just get an offer from their “strategic” out of the blue seemingly.
This happens because the strategic wants one’s Intellectual Property or they want their Sales Revenue or their “potential” Sales Revenue.
The Private Equity (P/E) Sale
P/E companies tend to want to build a portfolio of companies. All you have to do is look at their web pages. When you look at their web page, look to see if the previous owner was able to exit or not.
Some even focus on a particular industry such as Retail or Healthcare where they might appreciate your IP. In most cases, the leadership team is kept on board. There are some advantages such as a centralized HR department or centralized marketing services.
P/E firms are like bankers, show them your Balance Sheet and Income Statement and they will offer you something like 5 times Net Income. If you get more than that you’re lucky.
Should I go it alone?
No!!! Anyone can sell their company.
But how do you get what you deserve?
Do not go it alone unless you are just a super salesperson. Not unless you are a poor salesperson and just want to float your financials and get offers.
Sure you can sell your own company, but you likely will get less than what you thought your valuation should be. Shouldn’t you consider creating some competition, and attempt to get a higher valuation?
Even Real Estate people have open houses to create a since of urgency and then to show buyers the competition to raise the valuation.
The Intellectual Property (IP) Sale
If you are fortunate to have an IP you likely will get a higher valuation that others.
P/E offers somewhere around 5 times net income. For most this is barely enough to retire on.
With IP that your buyer can use to corner the market, win market share, be more competitive, etc…you will likely get many times net income. But you still need to SELL it.
5 times net income when you have, say, less than $250K is only $1M and then after taxes…why bother?
Then you can’t even EXIT. Maybe you got out of debt, but for what?
- How do I Raise my Valuation?
- How do I get multiple offers?
- How do I find someone that appreciates my IP?
- Where do I find someone that needs my revenue, my customer base?
- How can I get what I deserve?
EXIT Strategies that actually work
There are companies and/or consultants that help you do just that:
- Sell your IP
- Identify the Strategic Partners that appreciate the IP
- Package your company up for sale
- Position your company for the Buyers so they understand the value
- Help you build top line revenue and a sales pipe with marquee accounts
- Put all this into future revenue for the eventual buyer
- Role-play with you so when you get your one chance you don’t blow it
- …and then…aggressively sell your company, and not just the financials
- …and then
Do not just sell your financials. Have a solid EXIT Strategy.
If you have your own Intellectual Property yet your net income could be better maybe you should consider a consulting company that will work with you to get the valuation that you deserve.
XIT Group does just that. We do have an affinity to Supply Chain, Automation, Robotics, Industrial & Factory Automation, but we are happy to talk with you to help you out.