When I started to contemplate selling my last business, I was looking for data on what similar private companies were selling for. The media reported big company deals, but I knew they didn’t bare much relevance to my situation.

When I did hear about a private company sale, the details were never released publicly. Sometimes, the selling price was announced but rarely would they include the details of the multiple paid or the terms the sellers agreed to.

Although I’ll admit to a healthy dose of curiosity, I was also thirsty for the information so I could have a realistic sense of what my business was worth and the terms I would have to agree to if I wanted to sell it.

I figure you might have some of the same questions. Starting today, I’m introducing a new type of article to this site called “Done Deal”. A Done Deal will be a summary of a private business that has recently been sold. We’ll endeavor to include:

• The selling price
• The EBITDA (or seller’s discretionary income)
• The EBITDA multiple paid
• The earn out length and terms if any
• The amount of the purchase price financed by the seller (if any)
• The transferable lesson from the sale negotiations that all business owners can apply

To help me with this endeavor, I’ve hired 2 journalists, Nick Whitmore and Megan Harris, who will do the reporting.

Using the comments section below, please let us know what you think and if you have a “Done Deal” we should cover.

Here’s Nick’s first Done Deal:

THE RECIPE TO SUCCESSFULLY SELLING YOUR BUSINESS

DONE DEAL

By: Nick Whitmore

Somewhere in his mid sixties, after a career that saw him create and maintain nine successful restaurants, Simon (not his real name) decided it was time to hang up his apron.

“It took four or five sit downs with him before he finally had the confidence to go forward with the sale”, says Eric Gall, Simon’s broker and head of Florida Business Exchange’s Southwest Florida Office.

Simon’s business was generating $455,000 of Earnings Before Interest Taxes Depreciation and Amortization (EBITDA). The sale price of $850,000 represented an EBITDA multiple of just under 2. The new owners paid $475,000 in cash for the restaurant, while the remainder of the sum was financed by the seller at 6.25%.

During the due diligence process it was agreed that all restaurant recipes and procedures would be documented by Simon, so the new proprietors could keep the business exactly as it was under Simon’s ownership. It was a wise choice on the part of the new owners; “I ate there about three or four weeks ago, and it’s the exact same place”.

There was no earn out clause involved in the sale, however the new owners decided to retain Simon’s daughter at a premium wage to help with a smooth transition of ownership. “The buyers really liked her and she was great with the customers – she was around to greet the customers until they got comfortable with the new owners. I thought it was a smart move on their part” said Gall.

Deal Snapshot

Business Type: Restaurant
Revenue: $1,950,000
EBITDA: $455,000
Selling price: $850,000
Multiple paid: 1.87

Key takeway: document your processes and procedures so a new owner can replicate your success after you leave.

What do you think? Did Simon get a good deal?

Here are a couple of my recent articles I thought you might enjoy:

The Art and Science of Valuing Your Business

~ published March 10, 2011 BNET

When I sold my last business, I received a couple of written offers. Each revealed the price the acquirer was willing to pay for my company, but none included an explanation as to how the would-be buyers arrived at their offer price.

When I asked my advisers to help me, they threw out buzzwords like “discounted cash flow,” “risk-adjusted return” and “present value,” all of which they attempted to explain as only accountants can — in increasingly confusing terms. »more

Cash-cushion advice from Warren Buffett

~ published March 15, 2011 The Globe and Mail

Warren Buffett’s Berkshire Hathaway Inc. employs more than 260,000 people. But instead of running the company from the top down, Mr. Buffett sees it as a collection of 76 unique businesses, and employs just 20 head-office staff to hold it all together.

Although some of his companies, such as NetJets and Burlington Northern Santa Fe Railway, are large, others, including the likes of Nebraska Furniture Mart, See’s Candies, The Pampered Chef, The Buffalo News, and Justin Brands Inc., are relatively small.  »more

(photo courtesy of sxc.hu/Avolore)