10 Oct Selling Your Small Local Business
We are currently working with a man who has engaged us to sell a small local business he has developed over the last few years. While marketing his company, we found that most of those who may be interested in making an acquisition were not particularly interested in his business simply because it was too small. As we discussed a different strategy with this retiring businessman be suggested that the acquiring party would benefit significantly by purchasing the land next to his and building out the business further. He then proceeded to lie out a whole business plan for expansion that the acquiring party should pursue. He even suggested that the business next to his should also be purchased.
This man was simply trying to make his business attractive to a company looking for expansion, but the hard truth is that his company was too small. We are going to need to take a different approach in selling his company. Sometimes, with these circumstances, the best idea is not to look for someone to acquire your company for strategic expansion, but rather the best approach is to look for a replacement.
A manager who is being paid $70,000 a year currently is running the business. Once the company has a paid all of the expenses it generates about $47,000 in EBITDA. With the bottom line this low, it is very unattractive to larger companies looking to expand due to their desire to expand at a faster rate. I believe this business and other like it would benefit greatly from a succession rather than an acquisition. There are many people who are looking for a way out of corporate America and would love the opportunity to buy an established business that they can call their own. If a local buyer was willing to make the acquisition for a small investment he could become the owner operator and begin paying himself a six-figure salary from the beginning. A business like this is even small enough that the buyer could obtain a SBA loan and put up a small amount himself while the current owner does another small portion of the financing.
If you are in similar circumstances we suggest you call us a deal capital to inquire about how we can help you in your exit strategy.