Selling your language house

If you want to retire, leave the language business, join an Ashram in India, travel the world, and are unsure what to do with your current language business, there are some things you should know. Among them are preparation, pricing, process and exit strategies for the owners of language businesses.

For the seller, this is usually a once in a lifetime transaction. The good news is, a lot of the steps adhere to basic common sense. The bad news is, to quote Voltaire, “common sense is not so common.”


I am often asked how to prepare for selling a language business. But there isn’t just one answer to this question. If we use the analogy of your language business as a language house that you have built from scratch, the first step may become clear. You built your language house and continue to live in it — in some instances, you inherited the house from your parents — and you are quite familiar with the problems: the roof leaks, the basement floods, the stove does not work and the storm windows are missing. Before selling your house, you know to fix these things. Otherwise, when the house inspector comes, you will be cited for these issues and the price will change, or you will be asked to fix these problems upon pain of the buyer backing out.

The same principles would apply to your language business. You know better than anyone what needs to be addressed: too much debt, limited technology, reliance on one large account, ineffective production personnel and limited sales outreach. You want to fix what you can before the buyer’s house inspection and due diligence process. Otherwise the price of your language house may go down or you may be on the market for a much longer time until these issues are addressed.

For the buyer, preparation involves multiple steps. First, determine what a strategic acquisition would be. Take into account vertical focus, geographic location, revenue and profit numbers. What would be a good fit and why? Who is available to handle the integration process? When you decide on the price range, determine how you will fund the purchase. Discuss with your banker, accountant and partner what is involved to get approval for this amount. Failure to do so may result in an absence of funding at the 11th hour when a down payment is due.


How do you determine the price of your language business? Owners often ignore market rates and inflate the price of their company based on their emotional investment and attachment to the business. This is a common problem. Language business owners often do not study market forces and their stated sales price is not competitive.

A homeowner does not gauge the price of their home based on how much they liked living there. You may have had three home births, a lovely garden and indelible family memories, but that does not improve the dollar value of your home. Your house price is determined by market rates, trends, location, code adherence, house sales in your area and so on.

The same is true for your language business. Research the pricing of other, similar companies sold in the past few years. Talk to a broker and discuss the earnings before interest, taxes, depreciation and amortization (EBITDA) multiples for a language service business sale.

From my perspective, here are some general pricing parameters:

• Under $3 million annual revenue: two to three and a half times the EBITDA.

• $3-6 million annual revenue: four to five times the EBITDA.

• $6.1-10 million annual revenue: one year of annual revenue, or six to seven times the amount of EBITDA.

• $10.1-15 million annual revenue: one and a half times the amount of annual revenue, or seven to eight times the amount of EBITDA.

Pricing is not an exact science, however. All kinds of factors impact the price. Your EBITDA numbers could be quite high or quite low and this impacts the price. You may have only one account and this could lower the price. Or you have multiple accounts in a specific vertical, like life sciences, and this would raise the price. You may have software technology and this would change the multiples (as technology trumps services). In general, however, the above pricing parameters apply to most language companies.

Purchasing process

As a buyer, there are several red flags or deal-breakers to watch out for. It is best to check on these items before engaging lawyers and accountants in later stages of the deal.

You want to ask about debt. If the debt is too high, this is problematic and will lower the value of the business. Similarly, you want to research if the seller is paying their employees/freelancers in a timely fashion. Inheriting disgruntled resources can be challenging. You also want to find out early about the concentration of accounts. If the vendor gets 75% of their business from one account without a long-term contract, this might not be a risk you want to inherit. Or if the vendor sells 75% of their business to multilanguage vendors, you may lose this business when you purchase the company. So pricing would have to be adjusted accordingly. Another dealbreaker may be that the seller has 75% of their business with government or life science clients because the company is female- or minority-owned. Once they sell the business to you, if you are not a female or a minority, you would lose 75% of their business.

The sales process is pretty straightforward. Getting started, however, may not be easy. A seller does not simply announce they are for sale. So if you are determined to sell your business, you may want to reach out to a specialized broker or banker to help prepare financials and market your business confidentially. Or if you are well-connected in the industry, you can reach out to your network to confidentially test the waters. This may be a bit more challenging, as you may not want to let your clients or personnel know you are selling.

Once you have identified a potential buyer(s), there are several steps in the courting process. Exchange non-disclosure agreements, talk on the phone, send your financials, discuss pricing parameters, meet in person, discuss exit strategies and time frames. If all goes well, the seller receives a letter of intent, the buyer does due diligence, a contract is written up and a date is set.

The whole process can take as little as three months and as long as two years, depending upon the response time of the buyer and seller and the complexity of the transaction (multiple countries, legal issues, multiple owners).


Sellers sometimes ask me how best to choose a buyer (and vice versa). Here is where common sense comes in. You want to get to know this person or company. What are their business practices, level of integrity and track record? For a life or business partner, you choose someone you are compatible with, trust and share similar values with. The same is true when you are considering buying or selling a business.

Do some backdoor research on the buyer or seller. For example, if a buyer has bought businesses before, the seller may want to talk to a previous seller. How was the transition? Were there layoffs? Were employees treated well? What is the buyer’s philosophy around client retention, translation quality and tools development? If you are the buyer, bring in the seller on one of your client meetings. How did they do?

If you do not use your common sense, you may end up selling to or buying from the wrong person. It could be someone you do not respect, agree with or understand. The consequences could be damaging both financially and personally. The acquisition may not work. The value, reputation and success you have developed growing your language house could disappear.

Trust, compatibility and synergy are important. Do not forget to consider them when choosing a buyer or seller.


Let us assume the buyer and seller have met, liked each other, agreed to terms and set a closing date. The success of the acquisition is not guaranteed. A key component of the negotiation is deciding how to transition the accounts. The buyer wants to make sure that whoever is the face for the account can be there to transition to the new owner or business. Transitioning the accounts is a task to be handled with the delicacy and skill of an explosives expert intent on not detonating while moving the explosives.

Transitions can be complex. They involve technology, processes and staff. Before and during the transition, both seller and buyer want to address the roles, security and motivation of the staff. If the staff leaves, the new business will suffer.

Exit strategies

What is the seller’s exit strategy? Are you selling because you want to retire? If so, you may want to agree to a six-month transition, and lock in a sales price to be paid over the next few years. Are you selling because you need a bigger business to fund your technology growth? If so, you may want to negotiate a share of the future larger business. For the seller, determining an exit strategy before selling is important. The exiting process has to support the transition of accounts. If not, it will be a lose-lose situation for buyer and seller.

Compensation can be tied to the exit strategy. For example, the seller’s business may be under-performing and they might be confident that with more sales people, it will grow. In this case, structure compensation on an earnout. You get 25% payment up front, then future payments are based on what the new business earns — an earnout structure. If the seller believes the business is maxed out, you can lock in a price and agree on dates and amounts of future payments. If seller needs payments quickly, then negotiate a lower total price for a shorter payment period. If the seller wants to stay on and grow with the new business, negotiate a competitive salary coupled with earn-out payments.


There is a level of complexity involved in selling or buying a language business. Not unlike building your house, once it is finished, you may wish you knew certain things beforehand. Working with an experienced broker or banker has value for this reason, as they can help navigate the unexpected and the expected.