It Starts With an Honest Number
Before anyone markets anything, a broker figures out what your company is worth to a buyer. That means rebuilding your profit to show what one owner would really take home.
Your salary, your truck, a one time legal bill, a family member on payroll who doesn't work there: each gets added back or taken out. The result is the cash flow a buyer will pay a multiple of.
If the range is lower than you hoped, you learn that now, with time to fix it. If it is higher, you can plan your next step with real money in mind.
Getting the Company Ready
Buyers pay for what they can see on paper today, not for what the business could do with a little effort. So the work before listing is mostly paperwork and people.
- Three years of tax returns and matching profit and loss statements
- Customer sales for the same years, so a buyer can see who pays you
- Written leases, supply agreements and any customer contracts
- A list of equipment, vehicles and what is owed on each
- Someone besides you who can quote, schedule and solve problems
Owners who own their building should also look at the rent the company pays. Buyers figure value at market rent. A cheap lease to yourself can lower the price of the business without you noticing.
Keeping It Quiet
Detroit's business world is smaller than it looks. Suppliers, customers and good machinists talk to each other. If word gets out early, a key employee may start interviewing.
A broker markets the company without its name. Buyers see the industry, the area, sales and cash flow, and they sign a confidentiality agreement before they learn more. Your staff hear about it when the deal is truly done.
Who Buys Companies Here
For smaller companies, the buyer often lives within a short drive. Many are managers from bigger companies who want to own something.
As companies get larger, buyers come from farther away, including private equity groups and other suppliers who want your customers or your capacity.
Many buyers finance part of the price with an SBA loan, which can go up to $5 million. Sellers often carry a small note too. A broker helps you weigh cash at closing against the full price.
Diligence, Paperwork and Closing
Once you accept an offer, the buyer checks everything. Our page on what buyers check in due diligence lists what they ask for.
Michigan adds its own steps. A buyer is expected to hold back money until you show your state taxes are paid, which is why the Form 5156 tax clearance matters.
You also owe the buyer an unemployment notice before the transfer, and you close your state tax accounts after.
How Long It Takes
Seven to nine months from hiring a broker to closing is normal. Six is fast. Keep running the company hard the whole time, because a dip in sales during the sale makes buyers nervous. The full sequence is on our how a sale works page.
Want to start with a number? Send the short form or call (313) 555-0152.