The short answer is, it depends, but we generally see sales take between nine to fourteen months to complete, from start to finish. Selling a business is a complex process that depends on a multitude of factors. A few of those factors can include: 

• The size and complexity of the business. If your business is larger and more complex, it may be harder to get your ducks in a row, find a suitable buyer, finish due diligence, and paper the sale. 

• Market conditions. Like every offer, the sale of a business depends on the forces of supply and demand, including the demand for that type of business and the supply of qualified buyers.

• Proper valuation. If the business is listed at an excessively high price, this will surely extend the sale cycle. 

• Legal and regulatory requirements. Heavily-regulated industries may face longer sales cycles as more compliance must be validated.

Preparedness of the seller. The more prepared you are for the sale in terms of documentation, transparency, and structure, the faster the sale can close.

This rule of thumb may be obvious, but it bears repeating — the more prepared you are, the more smoothly the sale of your business will go. Some steps you can take to prepare include:

• Collecting your documentation. Organize all your financial records, contracts, and legal documents. If they are a mess, consider cleaning them up and putting them into an approachable, standardized form (or hire someone to do it).

• Be serious about valuation. Make sure you’re pricing your business correctly. Seek professional help in pricing your business so you don’t sit on the market or sell yourself short. 

• Market the business thoroughly. Create and execute a comprehensive marketing plan to get the offering in front of as many qualified buyers as possible. 

• Plan the transition. As soon as possible, start thinking about how to seamlessly hand the business off to the future buyer, and start putting the pieces into place to make that happen. 
• Consult professional support. Don’t go it alone. Seek the help of a professional business broker to facilitate the process. 

There are many factors to consider when selling your business. Some of these factors include:

• Timing. Consider whether this is the right time to sell, in terms of preparedness, health of the business, and market conditions. 

• Legal and tax implications. The sale is almost certainly a taxable event with various legal implications. Consult professionals so you don’t get blindsided.

• Customer and employee transition. The sale will probably be contingent on the maintenance of operations and sales, which means there needs to be a plan for transitioning the employees and systems that keep the business running, as well as any current customers.

• Confidentiality. Certain information handed over in the process of marketing and selling the business may be sensitive or disruptive to the business if disclosed to the public.

• Due diligence. The buyer will expect the opportunity to perform due diligence. Their needs must be anticipated, and your cooperation is essential for a successful sale.
• Negotiation strategy. Consider your objectives. What are you willing to compromise on? What is non-negotiable? Having several concessions in your back pocket will go a long way towards getting what you want. 

There’s no right or wrong answer as to when to sell your business in Houston — no magical season or time in the election cycle when you should definitely sell. Timing the sale of your business should depend on:

• Your goals. Is it time to retire, start a new venture, or take care of personal obligations? By some people’s logic, the best time to sell is when you’re ready.

• Financial health. If your business is in great shape and turning a profit, it will likely command a higher price, leading to a more successful exit for you. 

• Industry trends. If the future of your industry is bright, it may be a good time to sell, as buyers will be sanguine about its prospects and willing to pay top dollar.

• Demand. Are businesses like yours a hot commodity right now? If so, it might be worth striking while the iron is hot.

• Tax implications. Talk to your tax advisor. It might be a good idea to sell now from a tax perspective.

If you want the deal to close quickly, there are several steps you can take to speed up the process, including:

• Be prepared. Gather everything potential buyers will want to see, both in the initial evaluation and due diligence phases, and organize it into a presentable, easy-to-digest package.

• Set a realistic price. Don’t undercut yourself, but setting the right price is essential to quickly attracting a motivated buyer. Overpricing your business is a one-way ticket to a long, drawn-out process. 

• Market aggressively. Get the word out to prospective buyers. Use online listings, business brokers, industry publications, and your network.

• Be flexible. Don’t compromise on your core objectives, but look for concessions you can stomach handing over to smooth the deal. 

• Get professional help. Hire a professional business-sale consultant to smooth the process. 

It takes a lot of documentation to successfully sell a business. A brief list of what it takes would include:

• • Financial records, including 2-3 years of P&L statements, balance sheets, tax returns, cash flow statements, accounts receivable and payable reports, budget and financial projections, breakdowns of expenses, and bank statements.
  • Legal documents, including articles of incorporation, business licenses, permits, contracts and agreements, employee contracts and NDAs, intellectual property documentation, and any past or pending litigation records.

• Operational documents, including organizational charts, employee handbooks, HR policies, inventory lists, asset and equipment lists, SOPs, vendor lists, and customer lists. 

• Lease and real estate documents. 

• Employee records, including rosters, compensation details, and benefit plans.

• Documentation of environmental and regulatory compliance. 

• Insurance policies. 

• Warranties and guarantees.

• Customer and supplier contracts.

There’s no unified formula to tell you how much your business will sell for, but there are several established methodologies that could be used to arrive at a valuation. A few to be aware of include:

• Earnings Multiples. These calculations apply a “multiple” to one of your earnings metrics. Multiples vary by industry, but the idea is that a business with this level of earnings in this industry is worth this many times its earnings. As for which earnings metric you use, it could be the price-to-earnings (P/E) ratio; seller’s discretionary earnings (SDE); earnings before interest, taxes, depreciation, and amortization (EBITDA); or gross revenue. 

• Asset-Based Valuation. This could include the business’ book value, liquidation value, or a combination of the two. 

• Market Comparables. You could be able to arrive at an accurate valuation by comparing your business to similar businesses that have sold recently.

Your business broker can strategize with you to find the best way to value your business, and how to make it appealing to buyers.

Everyone wants the best value possible when they sell their business. Here are a few tips for maximizing value when you sell your Houston business:

• Boost your financial performance. If you know you’re heading for a sale, do everything you can in the runup to increase revenue, cut unnecessary costs, and clean up your financials so they present the best picture possible. 

• Optimize operations. Your business will be in greater demand if it runs like a Swiss watch. 

• Diversify revenue streams. Brainstorm new ways to bring in cash so your buyer pool sees the maximum potential. 

• Protect intellectual property and assets. Get as many trademarks, patents, and copyrights on paper as possible so it’s clear what concrete value the buyer is acquiring.

• Develop an employee and customer transition plan. Buyers will pay more for a business that won’t miss a beat after acquisition. 

• Reduce legal and compliance risks. Resolve any outstanding legal issues and update all validations of regulatory compliance.

• Offer seller financing. Buyers may be willing to pay more if you are willing to finance some of the purchase yourself. 

• Seek professional advice. A professional business broker or transaction advisor can help you position your business for top-dollar offers.

To get the best price for your business, it makes sense to get the offer in front of as many qualified potential buyers as possible. Here’s how to do that:

• Hire a business broker. Business brokers know how to access buyer’s markets for businesses and present your listing in the best light. 

• List online. Numerous online marketplaces exist to list businesses.

• Leverage your network. Put out the word to your contacts in the business community that you are interested in selling. Accountants and attorneys tend to be particularly good at connecting business buyers to opportunities. 

• Local business organizations. Attend meetings of organizations like the Chamber of Commerce or local business buyer networks and get the word out there.

• Direct marketing. Acquire a targeted list of potential buyers and contact them directly by mail, email, phone, or other means. 

• Online advertising. Use online media buying and targeting (Google Ads, Facebook Ads, etc.) to put your opportunity in front of the right eyes. 

When you sell your business, the cash proceeds could be handled in several ways, including:

• Lump-sum payment. In the simplest scenario, the buyer just hands over cash, you hand over the keys to the business, and you’re out.

• Earn-outs. Sometimes the deal may be structured so that some of your money comes in the form of subsequent post-sale payments based on the performance of the company. 

• Seller financing. You might be interested in carrying a note against the business and collecting payments on that debt from the buyer. 

• Working capital adjustment. The deal may include a stipulation of working capital to transfer with the business. If the actual working capital exceeds or falls short of this target, cash may be transferred between the parties to meet the requirement. 
• Payment of liabilities. Some cash for the deal may go to pay off loans, debts, and obligations, which come out of the cash before the seller receives the proceeds. 

Most SBA-preferred lenders typically require 30 to 60 days for loan approval and funding. Keep in mind that the speed of the closing process relies on the timely completion of paperwork, appraisals, environmental impact studies, and related tasks. If you’re in a rush to sell, it may be worth offering seller financing, picking an all-cash deal, or picking the buyer with the simplest financing plan.

Working with a business broker can significantly improve the value you reap from the sale of your business. A business broker can offer you:

• Expertise and experience. Your broker’s expert counsel will help you make key decisions in preparing for and executing the sale. 

• • Confidentiality. A business broker can present your business to buyers without exposing your plans to the public. You cannot.

• Valuation. It’s critical to get the price right, or your business could sit on the market. A business broker can help you arrive at the right valuation to tempt the best buyers while ensuring you don’t undercut yourself.

• Marketing. Business brokers are well-connected in the business community and know the latest marketing techniques, so they can get your offer in front of the maximum pool of qualified buyers.

• Ease of sale. The business broker and his/her team can take much of the busy work of the sale off your hands, so you can focus on more important tasks.

• Negotiation. Your business broker can guide you through the negotiation process to get you the best deal possible. 

All of these factors combine to make hiring a business broker a good investment for most sellers — even with the fees, you are still likely to come out ahead, as well as save time and effort.

Our fees are calculated according to the particular scope of work we handle for you. Typically, our commission rates fall within the range of 2% to 8%. For specifics about our fee structure for a business like yours, feel free to reach out to us.

Many company owners don’t want to expose their business to the world at large, even when it’s time to sell. You can manage the flow of confidential information that enters the public square in a number of ways, including:

• Hiring a business broker. Brokers are bound to discretion and can act as traffic cops for the information that buyers have access to. 

• Non-disclosure agreements (NDA). An NDA puts liability on potential buyers should they reveal any information you don’t want publicized. Buyers take them seriously. The experts at IBEX Middle Market Business Brokers can help you with this process.

• Anonymous advertising. You can always advertise your business by industry and description, not by name, to reel in potential buyers and then have them sign an NDA before sharing crucial info.

• Screen buyers. You don’t have to consider every buyer who comes knocking. Do some due diligence on each potential buyer before you give them access to confidential information. 

A number of taxes may apply when you sell a business in Houston. Taxes to look out for include: 

• Capital Gains Taxes. 

• Federal Income Tax.

• • State Sales Tax. Texas has no state income tax, but tangible property conveyed through the sale may be liable for Texas state sales tax.

• Franchise Tax. Also known as margin tax, based on revenue. 

• Property Tax (if real estate conveys with the sale).

• Transfer Taxes. Texas has no transfer tax, but local taxes may apply.

It is important to consult with a tax professional to understand the tax liabilities the sale might create so you don’t face any surprises.

The most basic tax you’ll likely pay is capital gains tax, which is assessed against the cash value over and above your basis in the business. Capital gains tax rates start at 15% but can go as high as 40% in the upper bracket. 

Capital gains may not be the only applicable tax for your Houston business sale. The location and assets conveyed may make a big difference. Make sure to consult with a tax professional to better understand how much you are likely to pay in taxes.