By Guest Author Sally Bergesen
Having been a business owner myself, I know how difficult the “when to sell?” question can be. And while we might have a large support system around us, it’s still difficult to find the right audience. Family? Possibly, but it’s unlikely they have the expertise. Friends? Potentially, but we want to avoid rumors. An attorney or CPA? That’s a start, but also – will they have a deep understanding of what the process looks like, market dynamics, who the buyers might be, or how long it will take from start to finish?
For family or privately-held company owners, selling a business is complex and emotional. And so the decision is put off, sometimes with vague hopes that it will just all work out. This is the wait-and-see place of stasis. And unfortunately, stasis can lead to a poor exit. As they say in exit planning, there are two times to sell a business: when you want to, or when you have to. In other words, find the exit before it finds you.
Selling on your own terms is the goal — and what every business owner should be working towards; equally as important as serving customers, growing sales, or hiring great people. Of course, starting the sale process is the hardest part — but it doesn’t have to be. Here are some tips and considerations about what is often one of the biggest decisions an owner will ever make:
- Start Early Begin planning well in advance of the need. Waiting until you’re in a rush, there’s an urgent health crisis, or need for liquid assets, can lead to unfavorable terms. A business broker can work with you to develop the right strategy around preparation and timing. The timing of when you enter the market, and how ready you are, will have a big impact on the terms of the deal and the final sale price.
- Business Valuation This step can’t be overstated in terms of importance. Accurately assessing the value of your company is critical. A skilled broker has the knowledge and experience to conduct a comprehensive valuation, taking into account both financial and non-financial factors. Arriving at a realistic and attractive offering is art and science. And while many people fixate on price, there are a number of terms that will impact your life, including buyer financing, the owner transition period, non-compete agreements, and tax implications (to name a few).
- Confidentiality There is a very real tension in business sales: on the one hand, you want as many people as possible to know about your opportunity, so you can attract the best and highest offers. On the other hand, you want no one to know you’re selling, so you don’t disrupt operations. An experienced and networked business broker knows how to market your business confidentially. (At IBA, for example, we maintain a Buyer Database of qualified buyers who have also signed confidentiality agreements).
- Marketing and Screening Expertise A top goal is to allow owners to continue running their businesses while the company is on the market. A good business broker is savvy at both marketing the business, as well as screening potential buyers. Tapping into an interested pool of buyers while also weeding out tire-kickers is an important role that shouldn’t fall on business owners.
- Negotiation Skills Talking with potential buyers about the value of what you’ve built can be emotionally charged. This is where representation can create a healthy arm’s length distance between you and interested parties. An intermediary will shield you from emotional negotiations, and advocate for your interests in securing a favorable deal. Having a broker also signals to buyers that you’re taking the process seriously, with an advocate to protect you.
- Due Diligence and Financing Preparing the necessary documentation and taking the buyer through due diligence can be time-consuming. A business broker streamlines the process, ensuring all documents are in order. It is often our job as well, to connect buyers with lenders who specialize in SBA loans, because at the end of the day, if the financing doesn’t come together, the deal can’t close.
- Pay on Performance Some business brokers charge retainers, and some only get paid if there’s a win-win transaction. We believe in the latter, because it prioritizes a successful sale. Because of this, however, business brokers who are only paid when the deal gets done, need to be selective about the clients they take on. But at the end of the day, it’s a significant benefit, as the company receives the valuation and the representation through the sale process at no charge.
Author Bio: Sally Bergesen is a Business Sales Intermediary with IBA. She helps owners of privately held companies and family-owned businesses successfully sell their companies. Prior to joining IBA, Sally founded and ran her own company for 16 years. After selling the business, she wanted to help other entrepreneurs navigate that highly nuanced process. IBA is a nationally-recognized brokerage firm based in the Pacific Northwest. Since 1975, IBA has completed more than 4300 transactions across eighteen industries, and is known for providing its clients with the highest levels of confidentiality, experience, knowledge, and skill. Sally can be reached at sally@ibainc.com or (425) 454-3052.
