By Steve Michaels
Selling your business is a daunting task that is full of potential blunders for a novice. Here’s why you should consider a broker for this important transaction.
1. Employ an expert: When selling something as important as a business that you have spent a lifetime building, you need to tap into the expertise of an experienced professional to guide you through the process. A business owner does not have the business selling experience of a business broker. Also, brokers can often recommend relatively simple business improvements to add value to the business. A broker can also make you aware of possible hidden problems that may arise during the sales process.
2. Duck the riffraff: An owner going through the multifaceted process of selling his or her business wants to deal only with viable, prescreened buyers. Business owners using a broker benefit from the experience of an individual who has a repertoire of qualified buyers. Brokers spend most of their time developing relationships with individuals who have the financial wherewithal to make acquisitions. This eliminates those without money and those who are not savvy in the confidentiality requirements needed in this industry.
3. Present your business to many interested buyers: A broker will bring a new perspective to your business along with a host of eligible buyers – not just the competitor down the street – that operate their business the same way you operate yours, thus making a compatible fit so there is a minimum of customer loss.
4. Get the highest possible sales price: Who would know more about the selling price of a business than someone who sells them for a living? A broker draws upon years of experience by using formulas to price a service. Reputable brokers use industry comparables, a proven “times monthly billing” formula, and EBITDA (earnings before interest, taxes, depreciation, and amortization) standards to show a potential buyer the true worth and value of a business. People selling their own businesses may not be aware of industry trends, or they might lose out because they do not know if it is a seller’s or buyer’s market.
5. Avoid hardball tactics: Today’s well-informed buyers are tough negotiators. Business brokers have been through the selling process before and are trained in negotiating tactics, giving them a potential edge in hammering out a deal in the seller’s best interest. Some seasoned buyers may tell a seller that a particular pricing formula is the industry standard. By having a broker represent you and your interests, you can be informed beforehand of the formulas, current selling prices for businesses, and whether there is an up or down trend in the market.
6. Have lowball/insulting offers screened and filtered: It’s hard to sell your own business when your heart and soul is in it. It is very difficult to remain neutral when someone is telling you that your business in worth less because they see some deficiency. Buyers want to pay the lowest price for a business; this may entail lowball offers, which will not only upset the nonprofessional seller, but will also make them wonder if they have priced it properly. An experienced broker will evaluate your business and explain how he or she determined the asking price.
7. Complete all paperwork efficiently and correctly: There are business buyers who brag that they have bought a business with a handshake or have drafted an agreement on a napkin. This is unwise. An experienced broker will use all of his skills to get the best deal for his client, including a sound asset purchase agreement. Many times, a properly executed agreement can save thousands of dollars. When you buy a house, it takes roughly one hour to sign all of the documents – should the sale of your business be any different? A broker will lead you through the entire process, from the letter of intent and due diligence to the final agreement so you are not left wondering if everything has been covered.
8. Ensure confidentially: If you’re a novice seller, how do you plan to sell your business without your staff catching wind of the impending sale? It’s nearly impossible. A broker will act as your intermediary, dealing with you one-on-one at a presubscribed phone number where you can talk openly without worries of your staff being aware of any negotiations.
9. Shield your staff from the distractions of prematurely worrying about and reacting to a possible sale: Whether you are selling your entire business or just your accounts, your staff plays a big part in the sale. Either they will be let go, or they will be kept on for the new buyer. In either case, a pending sale means discomfort for your employees. Part of what you’re selling is service. If your staff becomes worried and concerned about their jobs, the quality of service will suffer, thus affecting the bottom line and value of your business.
10. Sell quickly and to the right person: When you decide to sell, you don’t want the process to drag on for months and months. A broker will have a list of potential buyers who have been prequalified and fit the way you do business. You want to sell to someone who provides the same level of service you do so your former clients will fit with and like the new buyer. Clients become friends, and you don’t want to disappoint them.
Steve Michaels is a business broker with TAS Marketing and can be contacted at 800-369-6126 or firstname.lastname@example.org.
[From Connection Magazine – October 2008]