The Biggest Paycheck of Your Life
The sale of a business usually represents the largest paycheck in the life of a business owner.
It should be. It will sustain you for the rest of your life.
A Stark Reality
Among the more incredible realities facing business owners today, however, is the fact that, as the last of the Baby Boomers retire, the number of privately-held businesses sold annually in the US will increase over 15-fold.
On average, 23,776 such businesses have been sold annually over the past 30 years. That number will increase to an average of 378,000 per year through 2029.
This massive influx of supply will create a buyer’s market and all but commoditize the value of businesses that are not operating at peak profitability.
While sales volume is important, the primary determinant of the value of a business is a multiple of its EBITDA.
Thus, if you contemplate someday selling your company, it is critical to plan ahead and start taking the steps necessary to ensure that your company is operating at optimal profitability on a sustainable basis AND that you are not integral to the profitability in order to ensure the maximum valuation for your company.
At the time of sale, and even at any point in which a capital raise is involved, investors, lenders or prospective buyers will focus on four critical factors to determine the value of your company and their interest in investing, lending or acquiring: