So you’ve come to the conclusion that you want to sell your payroll business. Perhaps you’re getting ready to retire, or maybe you’re just ready to remove yourself from this line of work within the industry. Regardless of your reasoning, one thing’s for sure: you strongly believe that your payroll business is worth a lot of money. But before you can put your payroll business up for sale and expect the fish to bite, there are quite a few details you need to share with potential buyers.
In this article, we’ll cover some of those vital details and provide tips for meeting a successful business sale:
It’s all in the details
Putting your payroll business up for sale isn’t as simple as sticking a sign in the window and hoping the perfect buyer happens to stroll past with a stack of cash ready to make an offer. Understanding the worth of your payroll business, knowing what to expect in terms of a timeline during the process and planning your journey can provide peace of mind during this transition and ensure all of the I’s are dotted and T’s are crossed.
What is my payroll business worth?
There are quite a few factors that will determine the worth of your payroll business. From clients and employees to your COI connections and technology, you should talk to a professional that is experienced within the payroll industry to get an understanding of the value of your assets. ConnectPay can offer a Free Business Valuation Offer to help you determine what your business is worth.
What is the estimated timeline of the sale?
If you’re remotely thinking about selling your payroll book of business, you should start planning two to three years in advance, especially if your financial statements are not strong. Digital Exits reported that it can take seven months to close a deal on a small business sale, but the size of the deal has a major impact on the timeline.
The length of time a payroll business is on the market varies. Because buyers within the payroll industry are linked in a close-knit network, the sale can come fairly quickly and then take four to six months to sort all of the details.
Why is planning so important?
With the right plan in place, selling your payroll business can be smoother than anticipated. Planning gives you an opportunity to have all of the details and information in place to present a buyer, putting a polished, organized reputation on your business.
Tips for organizing and selling your payroll business:
1. Connect with the professionals for vital information regarding your business
Use a professional who knows the payroll industry if you want the actual value of your business. A professional with industry experience can help you better understand your financial situation and determine whether now’s the time to sell your payroll business, or if you’re better off waiting and timing the sale more accurately. Will your industry professional’s experience and knowledge positively impact your ability to achieve maximum value from the sale?
2. Get your financials in order
During the sales process, you need to provide a potential buyer with three years of financial statements, as well as your corporate tax returns.
It’s also smart to make sure your company is currently bringing in cash – this makes your business more attractive by ensuring a positive return for the buyer. Other important financial information you need to outline includes:
- Loans and liabilities.
- Real estate contracts.
- Employment agreements.
- Employee non-compete agreements, and more.
3. Present the right information from the start
Potential buyers will want to know every detail about your payroll business. Make sure to have the following details available to those interested in investing so they don’t have to sit back and wait for more information before committing to the sale:
- Average annual revenue per client.
- Average client employee size.
- Revenue growth over the last 3 to 5 years.
- Industries majority of your clients are in.
- Other “add-on” services your clients purchase from you.
- Your technologies that are proprietary or licensed; what are the terms of our license agreement?
- Client agreements
- Referral relationships
- Your client retention rate.
- Your operational processes.
- Your pricing strategy.
- Your staff’s tenure.
Remember: Potential buyers may have questions involving other details too, so keep an open mind when gathering all of this vital information.
4. Put your policies in writing
No matter who ends up buying your company, make sure your policies and procedures are in writing. A new buyer loves to see this type of organization.
Remember, the new owner may want to change policies to match their updated processes – and that’s just fine! Change is likely if they move your clients to a new payroll platform and have a different set of processes for onboarding a new client. If you have your current processes organized, however, this will make it easier for the new owner to navigate through and decide what stays and what goes. Pick a buyer with experience at managing a transition and the impact of change on your clients will be greatly reduced. A seasoned buyer will always be mindful of retention, an advantage for you the seller.
5. Make a lasting impression on potential buyers
A first impression always goes a long way. When you’re selling your business, this is one of the most important phrases to remember.
Think about how diligently you clean your car before putting it up for sale. This is the same mindset you should have in selling your payroll business. From all of the policies, forms and employee information, to the general setup of your onboarding processes and everything in between – make sure everything looks great.
Let ConnectPay assist you
Selling a payroll business can seem like a complicated process, but it doesn’t have to be when you’re working with an awesome team. The ConnectPay Acquisitions Team gives you the option to stay involved or completely transition out of your payroll services.
ConnectPay can ease this process of figuring out what your business is worth and take care of it for you with our Free Business Valuation Offer. Just fill out this form and we’ll reach out to you to discuss the factors that go into determining the worth of your business so you’re in good shape to sell.
Contact ConnectPay Acquisitions today for more information on the worth of your book of business and any other details you need assistance with during the selling process.
