Transcript

Welcome to Business Kickstart! Our mission is to help you build your personal business toolbox and in the process inspire you to embark on your own entrepreneurial journey. Your business toolbox consists of knowledges, skills, resources, and strategies needed to start and run your own business. 

Episode 12 – Think Big! Selling a Business

When we launched our podcast, the goal was simple - to help physical therapists and physical therapist assistants to see themselves not just as clinicians, but as entrepreneurs. We wanted to help students build their personal business toolbox and in the process inspire them to embark on their own entrepreneurial journey. But recently, we started thinking more about the full business journey—from launch to legacy. And that led us to a big gap – What does it actually mean to sell a business?

It might sound like a far-off concept, especially if you're still in school or just starting to entertain your first business idea. But thinking about your eventual exit—whether that’s five years or twenty years down the line—can change how you approach every decision you make today. As a result, let’s use this session to dream a little bit and discuss the process of selling a business.

How Is the Decision Made to Sell?

Deciding to sell a business is a major step - it requires evaluating numerous business and personal factors to ensure it’s the right move at the right time. Here are some of the key factors to consider:

1. Financial Performance
•    Revenue trends: Is revenue growing, stable, or declining?
•    Profit margins: Healthy, improving, or under pressure?

2. Business Valuation
•    Fair market value: Knowing the current value of your business is essential to make an informed decision on selling
•    Secret sauce: Understand what drives your business' value (e.g., recurring revenue, strong client base, proprietary systems)

3. Market Conditions
•    Industry trends: Is your industry growing or consolidating?
•    Economic climate: Interest rates, investor sentiment, buyer demand

4. Operational Dependence
•    Founder reliance: Can the business run without the founder? If not, it’s harder to sell
•    Operations: Strong systems, documented processes, and a capable team make transitions easier for buyers

5.    Scalability and Growth Potential
•    Upside potential: Businesses with untapped growth potential or proven scalability typically command higher valuations
•    Performance trend: If the business has plateaued, you may want to sell the business before performance starts declining

6.    Owner Motivation and Succession
•    Personal drivers: Level of burn out, retiring, or desire to pursue a new opportunity
•    Strategic thinking: Best path forward for the company

Are There Brokers for Selling a Business?

Yes! Just like there are real estate agents who help sell homes, there are business brokers who help sell businesses. A broker can assist with valuing your business, marketing it to potential buyers, negotiating the sale, and coordinating with legal and financial professionals. While not every business owner chooses to work with a broker, doing so can save you time, reduce stress, and help you avoid costly mistakes. Business brokers typically take 6-10% of the sale price as a commission, although usually receive nothing in the event the business does not sell.

Who typically buys businesses?

Everyone! Employees, entrepreneurs, customers, competitors, suppliers, vendors, investment banks, and private equity firms. 

How Do You Determine a Businesses Value?

Valuing a business is both an art and a science. It’s not just about your revenue or profit. Buyers want to know what they’re getting and whether the business can succeed without the founder.
Here are some of the most common ways small businesses are valued:

• EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization): EBITDA is a way to measure a company's profitability by looking at its core operations before accounting for certain expenses like interest, taxes, and depreciation. Businesses are most often sold at a 3-7 multiple of EBITDA. For example, a business with an EBITDA of $500,00 who sold at a multiple of 5 would have a sale price of $2.5 million.
• SDE (Seller’s Discretionary Earnings): This is essentially your net profit plus any personal expenses run through the business, such as your own salary or perks. It helps determine how much money the new owner could make. Businesses are most often sold at an SDE multiple of 1.5-4.0.
• Asset-based valuation: Especially relevant if your business owns expensive equipment or property.
• Market comparisons: What have similar businesses sold for in your area or industry?

But numbers alone don’t tell the whole story. A business with strong systems, loyal staff, recurring revenue, and a recognizable brand will be worth more than one that’s owner-dependent or disorganized—even if the financial numbers look similar.

What are the Steps in the Selling Process?

Here’s an overview of the typical selling process:
1.    Preparation and Valuation
•    Assess your business: Financial health, operations, systems, customer base, and market position
•    Organize financial records: At least three years of financial statements including profit and loss, balance sheets, and tax returns
•    Business valuation: Determine your business’ fair market value through a professional valuation or a business broker

2.    Marketing the Business
•    Create a prospectus: This is often termed a confidential information memorandum (CIM)
•    List the business: Through brokers, marketplaces, or privately
•    Pre-screen buyers: Ensures serious interest and financial capability

3.    Offers
•    Receive offers: Initial offers that show serious interest
•    Negotiate terms: Price, payment structure, transition period, non-competes
•    Due diligence: Buyer reviews business thoroughly (legal, financial, operational)

4.    Sale Process
•    Draft the purchase agreement: Requires lawyers and accountants
•    Agree on final terms: Including warranties, liabilities, and contingencies
•    Close the deal: Sign contracts, transfer ownership, and receive payment

5.    Transition and Post-Sale
•    Support the transition: Train the new owner, introduce clients/staff
•    Hand over assets: Physical and digital (e.g., equipment, systems, accounts)
•    Notify stakeholders: Clients, employees, vendors

As you can see, the number of steps in the selling process often require the expertise of a qualified business broker.

Let’s colorize the selling process by examining Scorebuilders’ sale to the Colibri Group in 2023. The Colibri Group is a professional education company that consists of over 40 leading brands. They offer flexible online and in-person learning solutions to individuals and businesses, serving millions of customers annually.

Key Factors in the Decision to sell Scorebuilders

• Desire for less intense work schedule and less responsibility after 34 years of ownership
• Favorable business valuation and perceived attractiveness of business
• Strong record of growth over three decades and favorable economic conditions

Scorebuilders’ Sale Timeline

Month 1
•    Interviewed potential business brokers

Month 2
•    Reviewed business valuations and selling strategies
•    Selected a business broker

Month 3
•    Provided business broker with financial and business operations documents
•    Assisted business broker to prepare marketing materials
•    Business listed through various online channels and databases

Month 4
•    Business broker fielded calls and emails from interested companies
•    Business broker screened interested companies
•    Participated in daily Zoom calls and company visitation

Month 5
•    Established a deadline for all interested parties
•    Reviewed offers, negotiated terms with selected finalists
•    Selected purchasing company
•    Legal team drafted sales documents

Month 6
•    Participated in the due diligence process

Month 7
•    Sale officially closed

Month 8 and beyond
•    Transition and post-sale activity

Why This Matters—Even for Students

You don’t have to be ready to sell a business to start thinking like someone who could.
A great thought exercise is to ask yourself - What would make this business something others might want to buy one day? And more importantly, what do I want this business to do for my life?

When you know what makes a business valuable to someone else, you start to build with that end goal in mind. You systematize your operations. You document your processes. You track your finances. You build a brand that has life beyond you.
Even if you never sell, this approach leads to a business that’s more stable, more profitable, and more freeing for you. And if you do decide to sell someday? You’ll be way ahead of the game. That’s the kind of thinking we want to encourage for every PT and PTA who dreams of creating something of their own.

Summary
In the end, selling a business isn’t just a transaction—it’s a transformation. It’s the culmination of years of hard work, risk-taking, and vision. But more than that, it’s a mindset shift. Thinking about your exit isn’t about checking out; it’s about leveling up. It forces you to build with purpose, to lead with systems, and to create something that can thrive without you. Whether you’re a student with a side hustle or a seasoned business owner with decades of experience under your belt, the journey from launch to legacy starts with thinking big. So dream boldly, build wisely, and know that every step you take today can shape the story you’ll one day get to sell.

Action
It’s reflection time! “What Problem Will You Solve?”
Think of a frustration or gap in the PT profession or healthcare system. If you had the resources and freedom, how would your future business address that issue? What innovation would you bring to the field? This activity inspires problem-solving, innovation, and impact thinking - turning frustrations into business opportunities.