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Some Things You Need To Know If You Are Thinking About Selling Your Business!!!

Some Things You Need To Know If You Are Thinking About Selling Your Business!!!

July 2025

Richard T. Hendee, Editor
The Silver Fox Advisor

Have you ever thought about selling your business? If you have, this article provides you with some steps to take to help make your sale process a little bit easier to understand and navigate.

You probably have an idea of what you think your business is worth, and that figure is likely more than a willing buyer will pay. Most buyers of businesses focus on a multiple of past earnings of the business (usually the last three years). You have probably heard of EBITDA (earning before interest, taxes, depreciation and amortization), and you may have even use it in analyzing your business’ performance. Most small business owners do not like paying Federal income taxes so they try and get the net income figure the lowest that they possibly can, while if you try to sell your business, you would want earnings to be as large as they can be. Thus, if you are thinking about selling your business, you probably should have some discussions with your tax advisor and change your strategy regarding how much you show in net earnings for the next three years. 

Business buyers know that most business owners will run as many personal expenses through their business in an effort to keep net earnings down, again to lessen the Federal income tax that they pay. Thus, business buyers typically will ask for a listing of add backs. These add backs will likely include things like – over market rent paid to the owner of the business who also owns the building (usually in a separate entity) the business operates out of, the owner’s entire family’s cell phone bill, a salary or salaries for a family member or members who do not actually perform any services for the business, the owner’s entire family Easy Pass toll card bills, vacations that are tied in to “business trips”, the owner’s and family member’s car loan or lease payments, insurance payments for family members who don’t work in the business. These are just a few possible add backs and I am sure you can probably think of some more. So, it would be a good idea to begin keeping a side ledger of all these expenses.

Regarding the business’ balance sheet, any potential buyer will not be interested in assuming any of the business’ debt obligations, so if your business has outstanding loans to financial institutions or business owners, those loan balances will all be netted out of any sale price. Additionally, business buyers typically will not want to purchase old or obsolete inventory, accounts receivable past 90 days, or some fixed assets like old trucks or vehicles with a lot of miles on them. 

Now for the intangibles, those items on which a value can not be placed but can work as a discount to the final price or a positive to final price. Some of those intangibles include things like accounting and operating systems. Is your accounting system outdated with the desktop version of QuickBooks or do you have the on-line edition? Are your operating systems internal excel spreadsheets or do you have an industry specific up-to-date CRM, inventory management, pricing and billing system? Additionally, do you have an active management team that has responsibility for various business functions like marketing, sales, human resources, operations, accounting and finance, or do you do it all? What is the age of your management team and employees, are they all near retirement age or do you have a good mix of experienced employees and employees learning the business’ skills sets? How do your facilities look? Does the grass need mowing? Are windows broken with cardboard covering up the broken glass? Do the walls and exterior need painting? Does the office space appear clean and organized, or are papers and files all over the place and dust or dirt in the corners and on pieces of equipment and furniture.

Another huge factor can be the amount of taxes you will have to pay on the sales price. Often times that tax payment can be half of the price you receive, so again you should bring in your tax advisor early in your sales process so you have a pretty fair idea on what the tax payment will be. There are ways to structure the final purchase of your business to lessen that final tax payment, so it is a good idea to know all this up front rather than at the closing table. 

If you need assistance in working though these points and more, I recommend you start by contacting the Silver Fox Advisors. Silver Fox Advisors who are former or present business owners themselves, and they have experience in selling a business, and in some cases several businesses. We encourage you to visit our website at www.silverfox.org to select a Silver Fox Advisor and also to learn more about the Silver Fox Advisors, as well as our great programs and community outreach endeavors.