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May 2, 2012

Selling Your Business? Gather Your Team of Experts

 

Here are the steps to follow as you decide who to involve.

Step-By-Step Actions:

Step 1. Decide who you want on your business-sale team.

Some business owners handle the process of selling their businesses with assistance only from their attorneys and accountants, who are the two key players on every business team. Others require assistance from appraisers, business brokers, and business consultants.

The following questions help guide your decisions.

DO YOU NEED...

YOUR ANSWER IS LIKELY TO BE YES IF...

An appraiser or valuation expert?

Your business involves intellectual property, proprietary processes, brand awareness or other assets that are difficult to value and price

Consultants?

Your selling price could be significantly higher if you implemented major business improvements beyond the expertise of you and your management team

A broker?

Your likely buyers are difficult to target and reach; you don't have time to run your business while trying to sell it; you're not the best person to market, present and negotiate the sale of your business.

Step 2. Determine whether or not and how to hire a business broker.

If you decide to market your business on your own, your offering is considered "for sale by owner" or FSBO (fizbo), which is an increasingly popular sale route given the tremendous marketing exposure offered through business-for-sale websites.

Even if you can go it alone, however, it doesn't mean you won't benefit greatly from the involvement of an intermediary who can help you market to and screen buyers, present your business offering, and guide the negotiation and closing process. 

Among the good reasons to hire assistance, consider that professional intermediaries provide the following benefits:

  • They allow you to run your business while it is being marketed for sale.
  • They can be a good buffer between you and the buyer.
  • They can handle the flow of documentation.
  • They have done it before and have likely dealt with most challenges that can arise.

When hiring an intermediary, be aware that businesses worth more than several million dollars usually seek mergers and acquisitions (M&A) specialists, and smaller businesses work with business brokers.

Use the following form to record answers from broker interviews:

Questions to Ask Brokers

Experience

  • Length of time in business?
  • Full time or part time?
  • Independent or part of a broker group?
  • Certifications: Are they members of the IBBA (International Business Brokers Association), designated with a CBI (Certified Business Intermediary), or members of other state business broker associations?

Performance Record

  • Number of annual listings?
  • Number of annual sales?
  • Average sale price compared to asking price?
  • Experience with businesses similar to yours?

Web Presence

  • Broker's site traffic?
  • Number of buyers in broker database?

Marketing Plan

  • How your business will be priced?
  • How your listing will be marketed?
  • How broker uses online business-for-sale listing sites, and which ones?

Contractual Arrangements

  • What is the broker's fee? (usually 10% of purchase price or a pre-set fee, whichever is greater)
  • Does the broker charge a cancellation fee if you withdraw the listing; or a trailing fee if after the listing expires you sell to a buyer referred by the broker?
  • Does broker allow carve-outs or exclusions that reduce fees if your business sells to a person you named as a potential buyer at the time of the listing?

References

  • Will the broker provide names and contact information so you can interview past clients?

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Mike Handelsman is group general manager for BizBuySell.com and BizQuest.com, the Internet's largest and most heavily trafficked business-for-sale marketplaces. @BizBuySell