With the dip in crude oil prices over the last five years, salt water disposal businesses took a hit. Now, as prices rise, the oil and gas industry is again beginning to see growth. Buyers are looking to capitalize on this growth by purchasing oil and gas services businesses, including salt water disposal companies. Whether you plan to sell next month, next year, or years down the road, there are things you can do now, to not only increase the value of your business but ensure you find the perfect buyer when the time comes. Consider these tips for selling your business for the highest price.
While some potential buyers plan to completely overhaul a business once it’s purchased, most prefer something more turn-key. Before you place your business for sale, take the time to tie up any loose ends. Fill vacant positions with highly qualified employees. Repair or update all broken equipment, including company vehicles. You want prospective buyers to see a successful, well-managed business already in place, instead of creating a long to-do list once they gain ownership.
You will also need to be sure your financials are organized before you meet with prospective buyers. Plan to show buyers profit and loss statements from the last three years, along with tax returns and balance sheets. Be prepared to explain the value your business adds to the industry, and provide future projections as well. Organized financial statements let interested parties know that the business is well managed, an added value to anyone looking to purchase a salt water disposal business.
Often, business owners wait until they have an immediate need to sell their business. Whether it’s a health issue, financial distress, or a downturned economy, it could make sense to plan an exit during challenging times. Unfortunately, waiting until you need to sell could greatly affect the outcome of your sale. In these circumstances, an owner does not have the benefit of time to wait for the perfect buyer or the best price. Instead, the owner must consider all offers on the table, and often ends up accepting much less for the business.
It may sound counterintuitive, but the best time to sell your salt water disposal business is when things are going well. Because all businesses associated with oil and gas are so closely tied to the economy, it’s important to have a strong understanding of the current market and future projections. The perfect buyer will place a higher value on your business during times of economic growth. In addition, selling when things are going well also allows owners to be patient as they wait for the right buyer and the right price.
As a business owner, you likely have a do-it-yourself attitude about things, which is why you’ve been able to build and grow a successful salt water disposal business. While this DIY spirit may help you in other areas of your day-to-day business, it is not recommended when it comes to selling your business. The process to sell a business, from preparing the business for sale to negotiating and closing the deal is both detailed and time consuming. Working with a business broker allows you to pass the difficult task of selling your business to an experienced professional, so you can continue to focus on what you do best—running a successful salt water disposal business.
When choosing a business broker to partner with you, be sure to look for a company with experience in the oil and gas industry. As you know, oil and gas is complex, and unlike any other industry. Your experienced broker should have a strong understanding of the type of buyer suitable for your business, and access to a large network of potential buyers. Vetting these prospective buyers is an important part of the process, saving you time and increasing the likelihood of making it to the closing table. Be sure that your broker has experience closing complex deals in the oil and gas industry.
Determining the right value for your business can be extremely challenging. Pricing it too low could leave potential profits on the table, but if the valuation is too high, you may turn away the right buyer. You may find valuation formulas online, but these should only be considered as a ‘ballpark figure,’ not a hard and fast valuation. In addition, buyers may factor other things into the price they are willing to pay, including the condition of the equipment, customer concentrations, and the state of the economy.
Again, it is best to work with a business broker with industry experience when determining the right valuation for your salt water disposal business. In the right market conditions, it is not uncommon for businesses in the oil and gas industry, including salt water disposal companies, to receive multiple offers for the business, driving the price up even higher. An experienced business broker will also factor this into the equation when determining the right value for your business.
Are you thinking of selling your salt water disposal business? With increasing crude oil prices and a strong economy, it may be the right time. Before you list your business for sale, however, take the time to prepare the business. Fill vacant positions and be sure your equipment is in working order. Organize your financial records as well. Then, find a business broker with oil and gas experience to partner with. The broker will determine the right valuation for your business, and find and vet prospective buyers while you have the time to devote to your business. The perfect buyer is out there, and together with your business broker, you will find them. Contact Sigma today for a free valuation.