The Kickass Entrepreneur
  • About
  • Book
  • Blog
    • All Blogs
    • Create Wealth (Investing)
    • Entrepreneur Interviews
    • Featured Top Posts
    • Growing Profits
    • Growing Revenues
    • Marketing
    • Positive State of Mind
    • Real Estate Investing
    • Retirement
    • Sales
    • Selling your Business
  • Top Products
  • Contact
The Kickass Entrepreneur
Subscribe
The Kickass Entrepreneur
  • About
  • Book
  • Blog
    • All Blogs
    • Create Wealth (Investing)
    • Entrepreneur Interviews
    • Featured Top Posts
    • Growing Profits
    • Growing Revenues
    • Marketing
    • Positive State of Mind
    • Real Estate Investing
    • Retirement
    • Sales
    • Selling your Business
  • Top Products
  • Contact
  • Selling your Business

How Much Does it Cost to Sell Your Business?

  • August 15, 2019
  • 1.1K views
  • 7 minute read
  • Jeff Wiener
Selling Your Business?
Total
15
Shares
2
0
13
0
Total
15
Shares
Share 2
Tweet 0
Pin it 13
Share 0

As an entrepreneur, selling your business is one of the major life decisions you’re going to make.

It’s also probably one of the more expensive decisions.

I came to the decision to sell my business, not because I needed to cash out, but because I didn’t want to run a business any longer. I was tired of being the president and was ready to try something different in my life.

What I hadn’t realized prior to starting the M&A process was not only how difficult it would be to sell my business, but moreover, how expensive it would be.

So let’s dive in, and I’ll share some of how much it costs to sell your business.

The Planning To Sell My Business Had Really Begun 4 Years Prior

When I met with my first investment advisor four years prior to the business sale, I was quite dismayed to find how unprepared I was for an eventual sale. Not only did I not have my personal affairs in order (family trust and tax planning), but I was completely overwhelmed with the list of items that needed to be ready when I decided to pull the trigger.

The list was an Excel document with 140 line items.

No exaggeration.

140 line items! That’s how many things the M&A advisor needed to see and the business needed to have in order, prior to even going to market.

I glanced at the list, made a mental note of some of the top things that needed to be done, and got to work.

It took me four years to organize the business and get things prepared enough so a buyer would be willing to consider the business.

Are You Prepared to Sell Your Business?

Many business owners are ill-prepared to bring their business to market and only begin the process of getting their business ready after it’s too late.

What do I mean by too late?

In the blog post titled “6 Things You Need to Do Now If You Want to Sell Your Business“, I wrote the following:

If you want to set your business up for an eventual sale, you need:

  • growth (an upward trajectory of earnings)
  • a decent level of profitability (north of 12% EBITDA to revenue)
  • a business with a large percentage of recurring revenue
  • a strong management team in place
  • clean income and cash flow statement and balance sheet
  • a well-run organization with advanced ERP and technology

Give yourself 1 point for each of the above you already have. If you’re hoping to sell your business in a few months and have just come to realize that you scored a 3 of 6 in the above mini-test, then good luck with the sale.

One small, or potentially really large caveat to the point about your business producing 12% EBITDA to revenue margins is that not all businesses are created equal, of course. I’ve seen situations where a business is actually losing money, and still receives many multiples of revenue as a valuation. Here’s what I wrote in another blog post titled: How to Expand Your Business Through Acquisition and Make a Killing

I spoke with a CEO friend who recently sold his business for 11×REVENUE. Not EBITDA, but revenue. His business was a rapidly growing SaaS business.

One of the more important points from the above list is having a strong management team in place. If you’re the primary sales, marketing, accounting, and operations person in your business and you haven’t built a team to help you, then how can you expect a buyer to transition your business successfully when you sell your business and walk away?

And therein lies one of the main barriers with respect to salability. Owner overinvolvement. The smaller your business, the more the owner is involved in the business, and the more difficult it will be to sell. This is often the case for small business owners with less than $5 million in revenues.

Conversely, the larger the business, especially once you scale past $5 million in revenues with a proper management team in place, the easier it is to sell your business. And once you’ve reached that stage, the next question is how much it will cost you to sell your business.

Selling Your Business? How Much Does it Cost to Sell Your Business?

The scope and complexity of work involved to sell a business, whether your business has revenues of $5 million or $50 million, is often the same. If anything, it’s often easier for a broker (or M&A advisor) to sell a larger business than a smaller business. So the higher up the revenue ladder you scale, the higher the EBITDA valuation you’ll receive and the lower the percentage the M&A advisory fees are with respect to the total sales price.

Picking the right advisor is crucial though, so it’s important that you get this part right. You need to make sure the advisor has sold businesses of your size and type before. If your business is in Toronto and your advisor is in Chicago and doesn’t know the local landscape for your local elevator repair business, then that could be a problem. Similarly, if your advisor typically works on smaller engagements and your business is the largest sale they’ve ever handled, that could also be a problem.

M&A advisor fit is crucial. Getting this right is often the difference between a successful business sale and no sale.

Jeff Wiener Signing the Paper Work to Sell His Business
Me signing the paperwork to sell my business

And with regards to fees, according to Brent Beshore from Axial, a firm that helps mid-market companies find the right buyers and investors, the usual range for M&A advisory fees is typically from as low as 3% to as high as 15% of the sale price with a minimum spend of $25,000. According to Brent, “That’s a wide range and necessarily so based on the levels of complexity, size of the transaction, industry dynamics, and buyer choice. Generally, the larger the transaction, the higher the numerical cost, but the lower the fees as a percentage of the transaction.”

Keep in mind that this is a business transaction between two parties, and as with any transaction, there’s always room for negotiation. In my deal, E&Y had asked for a five-figure monthly “work fee” that would be refundable on a successful sale. Not only did I negotiate this fee, but I also negotiated the percentage amount down from their original ask.

Pay particular attention to the details of the contract (proposal) though, because some of the fees can be somewhat confusing, especially if you haven’t worked with an M&A advisor in the past. These fees often require you to pay the full value of all consideration including cash, debt, equity rolled over, seller note, and earnout. Make sure you understand the subtleties. The fine print did, unfortunately, catch me by surprise. 

The percentage amount the broker will ask for will vary of course, based on the timing, market, competitive nature of the M&A field at the time, and many other factors, but the most important will invariably be the size of the transaction. If your business is worth $5 million, you can expect to pay upwards of 8 to 12%, and likewise, if your business has a $50 million value, the fee could go as low at 1.5%.

Legal and Accounting Fees:

What I’ve covered above are the M&A fees associated with selling your business. Next, and of equal importance, are the legal and accounting fees. For those, you’re typically looking at a minimum of $10,000 for legal, and slightly less for accounting, BUT, those fees can climb quickly the larger and the more complex the deal.  I’ve seen situations where legal fees can climb into the hundreds of thousands of dollars for a business in the $30 million dollar range, and in fact, it’s quite possible that the accounting and legal fees can be even more expensive than the M&A brokerage fees. You can read more about the importance of an accountant and lawyer in this blog post: How Important is The Lawyer and Accountant to The Small Business?

This could possibly be the largest transaction of your lifetime, so do your homework, get your business prepared (if possible, many years in advance), shop around for a suitable M&A advisor, and go kick ass. Hopefully the above provided some guidance on how much does it cost to sell your business.

Good luck,

Related Posts:

  • 6 Things You Need to Do Now If You Want to Sell Your Business
  • How Do You Know When It’s Time to Sell Your Business? It’s Not All…
  • Sell Me This Pen. I Tackle the Wolf of Wall Street Sales Riddle. Do…
  • How I Overcame My Biggest Oh F*CK Moment in Business, and How it…
  • What 1 Strategy Will Help You Grow Your Business the Most?

If you liked this post, you might also like this one: How Do You Know When It’s Time to Sell Your Business? It’s Not All About the Money.

You should also consider subscribing to my blog. I publish one article a week on small business and wealth creation.  You can subscribe here.

Also, I published a book during the summer of 2018, “The Kickass Entrepreneur’s Guide to Investing, Three Simple Steps to Create Massive Wealth with Your Business’s Profits.” It was number 1 on Amazon in both the business and non-fiction sections. You can get a free copy here.

 

Thank you for your interest in THE KICKASS ENTREPRENEUR'S GUIDE TO INVESTING. Three Simple Steps to Build Massive Wealth with your Business's Profits. Please check your email to confirm the book download. Form: 400529

There was an error submitting your subscription. Please try again.

Related Posts:

  • 6 Things You Need to Do Now If You Want to Sell Your Business
  • How Do You Know When It’s Time to Sell Your Business? It’s Not All…
  • Sell Me This Pen. I Tackle the Wolf of Wall Street Sales Riddle. Do…
  • Sell Me This Pen Answer: I Tested 20 People, Here Are The Results
  • Sell Me This Pen Interview: 3 Experienced Sales People Provide…
  • How I Overcame My Biggest Oh F*CK Moment in Business, and How it…
Total
15
Shares
Share 2
Tweet 0
Pin it 13
Share 0
Related Topics
  • business sale
  • entrepreneur
  • fees to sell a business
  • Selling Your Business
Jeff Wiener
Jeff Wiener

Jeff sold his company to private equity in 2017 and is now semi-retired. Jeff spends time traveling and with his family, writing this blog, managing his real estate portfolio of apartment buildings,  overseeing his investment portfolio, investigating angel investments, coaching other entrepreneurs, and managing his private equity holdings. Jeff is currently on a couple of boards, one for profit, the other not for profit, and now helps entrepreneurs grow their business, profits, and ultimately, create wealth.

You May Also Like
What are BATNA and WATNA and Invent Options for Mutual Gain
View Post
  • All Blogs
  • Growing Revenues
  • Selling your Business

What Are BATNA And WATNA And How Do You Invent Options for Mutual Gain to Win in Negotiations?

  • August 7, 2019
  • Jeff Wiener
Expand Your Business
View Post
  • All Blogs
  • Growing Revenues
  • Selling your Business

How to Expand Your Business Through Acquisition and Make a Killing

  • July 30, 2019
  • Jeff Wiener
Jeff Wiener, Semi-Retirement
View Post
  • All Blogs
  • Retirement
  • Selling your Business

My Eleven-Week Experience Running a Business as Interim President. Semi-Retirement on Hold!

  • June 18, 2019
  • Jeff Wiener
Sell your business
View Post
  • All Blogs
  • Featured Top Posts
  • Selling your Business

6 Things You Need to Do Now If You Want to Sell Your Business

  • March 19, 2019
  • Jeff Wiener
What are BATNA and WATNA and Invent Options for Mutual Gain
View Post
  • All Blogs
  • Growing Revenues
  • Selling your Business

How to Start All Negotiations Like a Champ. You Must Know This One Thing

  • September 10, 2018
  • Jeff Wiener
When to Sell Your Business
View Post
  • All Blogs
  • Featured Top Posts
  • Retirement
  • Selling your Business

How Do You Know When It’s Time to Sell Your Business? It’s Not All About the Money.

  • June 4, 2018
  • Jeff Wiener
Entrepreneur Semi-Retirement
View Post
  • All Blogs
  • Featured Top Posts
  • Retirement
  • Selling your Business

My Journey Post Business Sale as I Sail Into a New Harbour. The Next Stage, Entrepreneur Semi-Retirement, and Life Post Business Sale

  • May 29, 2018
  • Jeff Wiener
Jeff Wiener
View Post
  • Create Wealth (Investing)
  • Entrepreneur Interviews
  • Growing Profits
  • Growing Revenues
  • Positive State of Mind
  • Real Estate Investing
  • Retirement
  • Selling your Business

The Rest of the Story, Jeff Wiener Background

  • May 11, 2018
  • Jeff Wiener

Join 6,472 Entrepreneurs That Get My Business Building and Wealth Creation Posts by Email

I can teach you how to build a successful, profitable business, and turn that into millions in personal wealth.

Thank you for your interest in THE KICKASS ENTREPRENEUR'S GUIDE TO INVESTING. Three Simple Steps to Build Massive Wealth with your Business's Profits. Please check your email to confirm the book download. Form: 400529

There was an error submitting your subscription. Please try again.

We won’t send you spam. Unsubscribe at any time.

Recent Posts
  • 2020 asset allocation strategy 1
    My 2019 Portfolio Performance and 2020 Asset Allocation Strategy
    • December 5, 2019
  • wealth building strategies 2
    11 Most Effective Wealth Building Strategies Used by Personal Finance Pros in 2020
    • November 28, 2019
  • mistakes founders make with VC funding 3
    5 Big Mistakes Founders Make When Pitching for Venture Capital for Their Seed Round
    • November 25, 2019
  • what is medishare 4
    What is Medishare and How Does It Work? The Pros, Cons and a Review
    • November 25, 2019
  • Obstacles to Business Growth 5
    How to Overcome Obstacles to Business Growth and Kickstart Your Business
    • November 20, 2019
Featured Posts
  • what net worth makes you rich?
    • All Blogs
    • Create Wealth (Investing)
    • Featured Post for Main Menu
    • Featured Top Posts
    What Net Worth Makes You Rich? The Average Net Worth to Make it Into the Top 1% and How to Get There
  • Wealth Building Secrets
    • All Blogs
    • Create Wealth (Investing)
    • Featured Post for Main Menu
    • Featured Top Posts
    14 Wealth Building Secrets You Need To Know
  • Sell me this pen, Wolf of Wall Street
    • All Blogs
    • Featured Post for Main Menu
    • Featured Top Posts
    • Growing Revenues
    • Sales
    • Sell Me This Pen
    Sell Me This Pen. I Tackle the Wolf of Wall Street Sales Riddle. Do You Know the Right Way to Sell the Pen?
Categories
  • All Blogs (144)
  • Create Wealth (Investing) (41)
  • Entrepreneur Interviews (7)
  • Featured Post for Main Menu (3)
  • Featured Top Posts (20)
  • Financial and Investment Calculators and Economic Data (6)
  • Growing Profits (10)
  • Growing Revenues (41)
  • Growing Revenues (8)
  • Marketing (9)
  • Positive State of Mind (31)
  • Real Estate Investing (10)
  • Retirement (10)
  • Sales (6)
  • Sell Me This Pen (3)
  • Selling your Business (9)
  • Uncategorized (26)
Follow us
Author
Jeff Wiener
Jeff Wiener
Jeff sold his company to private equity in 2017 and is now semi-retired. Jeff spends time…
[contact-form-7 id="229" title="subscribe horizontal"]
about
The Kickass Entrepreneur

Expand Your Business, Improve Profits, Create Wealth

Expand your business, improve your profits, and create wealth. Each one of the three can be elusive goals. Follow the right steps, and you, too, can create financial independence. It is possible … you just have to take the right steps.
NAVIGATION
  • About
  • Book
  • Blog
    • All Blogs
    • Create Wealth (Investing)
    • Entrepreneur Interviews
    • Featured Top Posts
    • Growing Profits
    • Growing Revenues
    • Marketing
    • Positive State of Mind
    • Real Estate Investing
    • Retirement
    • Sales
    • Selling your Business
  • Top Products
  • Contact
TAGS
apartment BATNA Business business failure business growth business sale Capitalization Rate CAP Rate cash cash flow Creating Wealth Discipline entrepreneur entrepreneurship excel goal setting Growing Business investing investment real estate M&A marketing Marketing KPIs Mergers and Acquisitions | M&A | Entrepreneur Blog Millionaire millionaire next door mistakes MUR Negotiation Peter Principle Profit profitability real estate retirement revenue Revenues sales sales management scaling business Semi-Retirement Blog | Entrepreneur Blog | Small Business Blog small business Stagnant stocks success Thomas Stanley wealth
RECENT ARTICLES
  • 2020 asset allocation strategy
    My 2019 Portfolio Performance and 2020 Asset Allocation Strategy
    • December 5, 2019
  • wealth building strategies
    11 Most Effective Wealth Building Strategies Used by Personal Finance Pros in 2020
    • November 28, 2019
  • mistakes founders make with VC funding
    5 Big Mistakes Founders Make When Pitching for Venture Capital for Their Seed Round
    • November 25, 2019
  • Obstacles to Business Growth
    How to Overcome Obstacles to Business Growth and Kickstart Your Business
    • November 20, 2019
  • growth stock
    7 Ways to Spot the Fundamentals of a Growth Stock
    • November 15, 2019
  • Tesla Model S
    Is It Worth it To Own a Tesla? My Battle To Keep, or Not Keep My Tesla
    • November 11, 2019
    • 2 comments
The Kickass Entrepreneur
  • About
  • Coaching
  • Book
  • Blog
  • Contact
  • Privacy Policy
  • Terms
  • Disclaimer
  • Facebook
  • LinkedIn

Input your search keywords and press Enter.