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3 Things to Consider When Selling A Collection Agency

When you sell a business, there are many steps involved and several consideration to make before the transaction can be fully completed. Before embarking on this monumental undertaking, there are key things to consider. If the type of business you are selling is a collection agency, there are specific points to be aware of that can help the process go along as smoothly as possible. 

How Much is it Worth?

Business valuation is one of the most important aspects that need to be considered at the start of the selling process. The business owner should always have a complete idea of the value of their business before attempting to sell it. The business valuation can be performed by an outside company and this is in fact ideal as the owner will receive an objective and unbiased assessment of their business value.  The process begins with a one on one consultation with the business owner and a strategic advisory. Once all the pertinent documents have been submitted to the evaluating company, the entire process should take between 4 to 6 weeks to be completed. The results can be received in reports that are a breakdown of the total business value. The reports can include several categories such as industry macro level data and an operational financial and client summary.

The primary outcome of the entire valuation process is the production of what is called the Adjusted Income Statement. This statement is a key document in the valuation process and shows a forecasted projection of company earnings as well as a normalized assessment of the company over the past 3 to 5 years. Some components that can be included in the Adjusted Income Statement include onetime expenses, shareholder compensation and benefits (for those that would not exist post transaction), and a reverse adjustment that will normalize compensation for any shareholders who are continuing with the business if it is above or below market value.

Tax Consultation

Once the business has been thoroughly assessed by a business broker or valuation company, the owner should meet with their accountant to discuss the tax impact of their sale. Outlining specific goals that the seller would like to meet can assist in the process as the tax impact can greatly affect the amount of cash in hand after a sale. The accountant will go over the current Federal capital Gains tax information and assess how it will impact your sale.

The seller will want to consider what they will want to accomplish financially with the sale of their business. For many business owners considering selling, retirement is an attractive option. Others may wish to simply put their children through college and pay off a mortgage. Regardless of the specific financial goals, outlining these before a sale and meeting with an accountant will help to ensure that those goals are met. The accountant can help to structure the deal in such a way as to meet the goals of the seller for the best results.

Using an Intermediary

When selling a business, it can be helpful to use an intermediary company. This can be advantageous for several reasons. An intermediary company has years of experience in business to business transactions as well as mergers and acquisitions. They can advise the business owner on selling techniques, listing tactics and several other details involved in the selling process. In addition, a business intermediary can offer a fresh and unique view of the business since they are viewing it from the outside. They will be able to offer advice that is unbiased.

Some of the different questions your business intermediary may pose are

• Has your business been growing each year or has it been stagnating or even declining?
• Is your business concentrated between one or two clients or do you have a wide variety of clients?
• Who is the primary manager of your business? Are they committed to continuing their position once the sale has taken place?
• What will add to or detract from the total value of your business?

Having a strategizing session and performing a comprehensive analysis with your business intermediary can help you to get a firm grasp of where your business now stands and where you may need to get it to before considering a sale. Once you have had a analytical session with your business broker, you will have a more complete understanding of the selling process overall as well as how your business may be improved.

Being Diligent

Being diligent is key in the whole selling process. It is imperative to take the time required to go through the whole selling process and not rush through it. Taking the time to look over each step of the process will guarantee that the sale goes smoothly and all aspects are covered. Meeting with several professionals such as a business broker, a CPA accountant skilled in business sales and also a business tax specialist will ensure that the seller receives the best advisement possible.

To locate a business professional in the local area, the business owner can perform a simple internet based search. Using Google or any major search engine, they can type in the state they are located in and the service provider they require such as ‘Florida business intermediary.’ This will turn up a variety of results that will be useful during the sales process. Comparing reviews and reading about each potential business professional can be helpful in making a decision. Although the entire process may be slow going, from choosing a team of professionals to closing the sale, the main point of note is to be diligent and to take the necessary steps to ensure that everything is in place for a smooth and stress free sale.

Conclusion

By taking the time to locate skilled professionals to assist with a business sale, the business owner will be able to have more peace of mind throughout the transaction process. In addition my taking the main three points into account; valuating the business, having a tax assessment and consulting with a business intermediary, the seller can rest assured that their sales process will result in their financial goals for their sales being met adequately and efficiently.