How to Sell a Financial Business

In this article, I am going to share with you useful tips on how to sell a financial business from start to finish.

Ideally, selling any business isn’t as simple as people may think.

Many people think that as long as the business is successful, you can just sell it to larger firms or opt for internal succession with one of your employees many things must be addressed before you hand over your financial business to the buyer.

First, you need to assess your goals and make a concrete plan. It’s just a complicated and stressful process but we will show you how to do it the easy way.

Just keep reading.


Financing is the process of providing funds for business activities, making purchases or investing.

Financial institutions such as banks are in the business of providing capital to businesses, consumers, and investors to help them achieve their goals.

Business finance includes reading financial statements and connecting the dots between your profit and loss, balance sheet and cash flow statements.

Financial businesses have high and low cycles that can either increase or decrease the cash flow.

Don’t expect to get a buyer for your financial firm during low cycles.

In fact, you will make good money if you are selling a successful financial company.

"As a rule, you will need to engage the services of a broker who will act as a mediator when selling any type of business", advises Joab Gordon, a financial advisor who also offers dissertation help to students.

Also, don’t do things in a hurry.

Note that you need to understand the steps involved in selling your business, what options are available for you, etc.

With that in mind, let’s get started.

1. Determine Your Goals and objectives

Selling a business isn’t a one day endeavor. Sometimes it can take longer than you had anticipated. You need to continue running your business successfully before you hand it over to the second owner.

Related: How Long Does It Take Sell a Business

Now, while running your business as you look for a potential buyer, you need to decide what you plan to do next, determine whether there are hindrances that could affect the transition of your business to the new owner, etc.

As a rule, always have a detailed exit strategy that takes into account your financial and personal goals.

2. Keep Your Books Clean and Ready

According to Linder Hurnly, a professional business broker who is also the author of review, potential buyers will want to engage in a transparent business deal and to get them to make you an offer, your financial books need to be clean.

Buyers will want to see the following documents for a period of three years or depending on the period you’ve been running your financial business:

  • Tax returns
  • Profit and loss statements
  • Leases (if any)
  • Supplier and vendor contracts
  • Balance sheets
  • Customer information
  • Bank statements

A genuine buyer will even ask these documents that date for a period not less than three years. A good rule of thumb is to seek help from an accountant who will help you to prepare clean and verifiable financial statements.

Remember every transaction must be accounted for else it will send a red flag to potential buyers which could make it difficult for you to sell your business.

If you are considering selling your business in the future, I would advise you to start using accounting software to avoid future headaches.

3. Evaluate the Value of Your Business

Of course, you don’t want to sell your business at a loss. Unfortunately, if you asked a business owner what the value of his company is, you will be surprised that not all can figure out that. Well, it’s normal.

Usually, your business’s value depends on what industry you are in and how big or small it is. Still, you can determine your business worth with the other specifics included or excluded.

Generally, a small business is worth between two or six times its cash flow. The more the cash flow the higher the value of your business. Other things that can help to determine the value of your business include industry trends, location, market demand, etc.

You could also hire a professional appraiser to review your business and determine its worth.

Another technique to determine the value of your business is to look at similar businesses the sold in the recent past.

You will also be required to prove why you think your business is valuable.

Related: Online Company Valuation Tool

4. Obtain Help

There are three options at your disposal when selling your business:

  1. Sell it directly to the new owner.
  2. Engage a business broker.
  3. Seek the help of an investment banker.

Let’s take a look at each of the three options.

Selling directly to the new owner

This option involves you, dealing with the buyer directly. You are not charged fees. Note that even though there are no associated fees, you risk selling your business at a loss/undervaluing.

That’s why it’s important if you decide to go with this option, you search for similar businesses in your industry that were sold in the recent past to get a sense of how to quote yours.

If you succeed to sell your business using this option, it can bring more money than the other two methods below.

Engage a business broker

Most business with not more than $5 million in annual profit seek help from business brokers when selling their businesses.

With this option, you will pay the business broker a certain percentage (between 5%-15%) of the sale price.

Video: Pitch-to-Brokers Tool: How it Works

The good thing about working with a broker when selling your business is that you will be relived from searching for buyers and the headaches of business valuation.

But as a rule, consider a business broker who understands your business and one who has done similar deals with other businesses.

Use an investment banker

The other option you have is to work with an investment banking firm.

An investment banker is more or less similar to a business broker but with a difference in that the former is preferred if your business operates regionally or nationally whereas the later handles smaller and less complicated businesses.

You can save a lot of time with this option although you need to get things right from the word go.

Similar to a business broker, an investment banker will do the business valuation, prepare all the documents required for a sale, screen buyers, and offer advice during negotiation.

On a successful sale, you will pay an investment banker around $50,000 to $100,00 with a 1% to 5% cut of the total price.

As you can see, selling your business directly to buyers is cheaper but you will lack the expertise you could get with the other two options.

5. Find the Right Buyer

Now that you have decided to go it alone (you will be lucky if you choose the other selling options and the deal goes successful), it’s time to find the new owner of your business.

You have plenty of options as well here.

  • One, you can decide to pass on the reigns to your current employee.
  • Secondly, you can find a potential buyer within your professional or personal network.

And if you decide to work with a business broker, make sure they understand the ropes of selling a financial business.

You could also choose to market your business on the internet. When marketing your business online, make sure you provide all vital information the same way a resume writer would do when marketing resume writing services. When a buyer reaches out to you, keep your questions ready for asking to ascertain whether they are worth having a conversation about your business or not - some are just timewasters.

Sign the Deal

Assuming you’ve found the right buyer, and you have come to an agreement, ensure you work with a qualified business lawyer who will help you in the signing of all legal papers before you hand over your business to the new owner.

Published by ExitAdviser


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