Many times a private business owner who is contemplating selling their business is unsure how to start, what to do, who to turn to. Do I go to my accountant? Do I go to my attorney? Do I need a real-estate broker (maybe my brother-in-law) to sell my property? All trusted advisors for sure. The definitive answers: No, no, and no. The real answer is that you need a good business team. That is, a good “business” Attorney and the right Business Broker.
Your accountant will play an important role in providing you with the financial information you need to begin the selling process and data needed during the due diligence phase (if you get there). He or she will play an important role and may be able to provide analytics that are specific to your company. But what does an accountant know about actually selling a business?.
Your attorney may or may not be the right skill set to help you with selling the business. You will need an attorney whose role will be to ensure the legality of the transaction. The “legal-ese” so to speak. Also note, the business terms of any agreement of sale are not determined by the attorney. The Seller’s attorney must have knowledge of aspects of contract law, tax law, intellectual property rights, licensing, zoning laws, and the laws specific to the business.
A real-estate broker is rarely necessary. Generally, it is far more advantageous for the Seller to “put a big red bow” on the deal and include property with the sale of the company. value for the property if it is bundled into the deal versus sold for the appraised value only.
So, do I need a Business Broker? Well, if you are committed to selling your business and you want to maximize your return on the sale, the answer is yes
There are only a few profiles of Business Brokers. The first type of Business Broker is referred to as “main-street” broker. They sell main-street businesses like restaurants, bars, salons, stores, etc. They advertise locally, try to network to sell, and have 29% closing rates. The second type of Business Broker is the banks and M&A firms. These firms focus on publicly-held companies typically valued over $100M. They charge outrageous retainer fees ($150K+) to develop a “book” on your business and industry and get a very high commission.
So where do I go to sell my business? Your choices of Business Brokers in this space are not abundant. But they do exist.. Any good mid-range broker requires a reasonable retainer fee and a reasonable commission rate (10% is standard) depending on the dynamics of the business being sold. The top-notch brokers minimally provide the following services:
- Pre-sales consulting and sale-ready preparation advice – help getting the business ready for sale.
- Business valuation – provide a saleable price to the owner.
- CONFIDENTIALLITY – this is majorly important and a covenant between the Broker and Seller
- Vetting of prospective Buyers – The Business Broker only processes inquiries from potential Buyers that are 1.) under non-disclosure agreement, 2.) have proof-of-funds or a valid financial plan, 3.) meet the Sellers buyer criteria. Buyer prospects are thoroughly vetted by the Broker BEFORE the Seller is ever identified or introduced for a meeting
- Transaction orchestration – this type of Broker takes command of the selling process.
The bottom line is that, yes, you need a broker. The right broker. With the right Broker, you and the buyer will be most satisfied at closing and beyond.
by Ray Chernaskey