The desire to sell your own company can have a wide variety of causes: We already have in the last article discussed in detail. And surely you have your own personal reason too, if you made it to this blog post. However, as individual as the reasons for selling a company are, the things that should be considered when handling corporate succession are clear. You will find out what these are if you read on.
Sell a company – but how?
If you want to sell your company, you first need a prospective buyer. Ads in industry newspapers and advertisements on platforms such as Projektify are suitable for this. With both variants you reach numerous potential investors and buyers of companies. At Projektify it works like this: You simply register for free and create an advertisement – also free of charge – in which you explain the background and already explain the most important key data of your company in great detail. The processing takes place exclusively between seller and buyer. Projektify only provides the platform.
You should already clarify the following question in your ad:
- How high is the turnover?
- How high are the fixed liabilities?
- Are there any outstanding loans that need to be paid back?
- How long has the company existed?
- What is the legal form?
- Who else is involved in the company besides you?
- How many people does your company employ?
- What future potential does the market in which the company is active hold?
- Why do you want to sell your company?
Calculate realistic company value
You don’t necessarily have to enter a value for an advertisement on Projektify, but note that you will get more attention and serious inquiries. Also: The day when you have to negotiate the price with the potential buyer will come anyway. It is therefore advisable to have a clear idea of the value of your own company straight away. At this point, however, we cannot and do not want to make a final statement about how you can determine a realistic value for your company. Because: The company value is calculated from far more factors than just sales and profit. But be careful: buyers must first be convinced of the potential and value of your company. As a seller, you are in principle in a worse negotiating position anyway, as the supply of companies is far greater than the demand from any buyers. It is therefore clear that buyers primarily pay attention to the isolated factors of sales and profit.
Different legal forms = different company values
Buyers generally orientate themselves towards the company’s future earnings potential. So you should base the value of your company on numbers that are realistic for the years to come. In addition, the legal form of the company determines the net earnings potential:
In the case of partnerships such as an OHG or KG, various amounts must be deducted from the Ebit – this is what the “earnings before interest and taxes” are called. This includes, for example, a typical manager’s salary, provided that you, as the company owner, have not yet received a fixed salary and the company profit represents your salary.
In the case of corporations such as a GmbH or AG, the EBIT often also has to be adjusted. Example: If the previous managing director or board member’s salary is above the normal market amount, the difference must be added to the EBIT. However, if the amount is lower than the general manager or board member’s salary, this difference must be deducted from the EBIT.
The adjusted EBIT, i.e. the profit before interest and taxes, is then multiplied by a so-called multiple. These factors vary by industry and are based on experience and expectations.
Your company makes an annual profit of 100,000 euros before interest and taxes. Since the buyer may have to hire a managing director who receives a salary, you deduct an industry standard salary of, say, 60,000 euros. So you are with an adjusted EBIT of 40,000 euros. You multiply this amount by the current and industry-specific multiple. In this case, let’s take the factor 6.4. The result, and thus your company value, is 256,000 euros according to this calculation method. However, poor or extremely positive future prospects often radically change the value.
“Determine the value and find buyers – what’s next?”
When the company valuation is complete, all legal, financial and organizational questions must be answered:
- How should the legal handover take place?
- Are there any tax aspects to consider and what are they?
- What happens to current loans?
Since there will be more to these three questions, it makes sense to develop a kind of checklist that will be worked through gradually. In addition, it is advisable to secure the help of a lawyer or notary who will draw up the sales contract for the company and handle the transfer in a legally sound manner. They’ll help you with smaller companies Projektify contract templates already on. If your company is a company with extensive structures, you cannot avoid going to a lawyer, management consultant and / or notary.
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