The advantage to using a Business Broker is primarily to gain access to his/her buyers, sellers and transaction experience. A good Broker will be able to help you price the business, know where and how to market it, screen buyers for you, prep you for showings, depersonalize the negotiations, have gigabytes of contracts to use and have the lending, legal and accounting contacts to help you close a deal. Selling a business is complicated and there’s a lot that goes into the process and using a Broker can save literally dozens, if not 100’s of hours.
Buying or selling a business is not like selling real estate. While there is standardization is the real estate world (showings, trips to the title company and cosmetic surgery), there is none when buying a business or selling a business and a huge difference exists in the expertise required to complete these transactions. A business has intangibles that could have substantial and often difficult to determine values whereas a piece of real estate is one simple asset with a known (or easily obtainable) value.
A few tips that could help you choose a transaction team:
- Business Broker
You obviously want experience and there are two primary credentials in this field to help you choose a Business Broker; Certified Business Intermediary (CBI) and Merger & Acquisition Master Intermediary (M&AMI). The difference between the two is mostly the size of market they serve. A CBI works with Small businesses and M&AMI’s work in the middle market. You can check them out here:
- CBI – www.ibba.org
- M&AMI – www.masource.org
- Look at their LinkedIn profile.
- Check out their website.
- Use caution with Brokers who specialize… Industry specialists tend to market only to buyers already in your field. Seriously? Every study ever published shows buyers rarely purchase a business in a field they’ve already been in… they want a change.
- Transaction CPA
Funny how we use CPA and accountant (or bookkeeper) interchangeably in small business but there is actually a difference. A CPA is licensed by the state and the designation requires a rigorous qualification process, not so for an accountant. That’s not to say however, that an accountant can’t gain through experience the skills to advise clients on selling a business. The critical factor is experience in allocation of purchase price. As mentioned, most small business sales take the form of an asset transaction which means the purchase price could be allocated to many different classes having an effect on your after-tax proceeds. If your current firm regularly practices in this area, fine, run with them. If not, you’ll want to find someone that does.
- Transaction Attorney
In business law, there are basically two types of attorneys; litigation and transaction. Obviously, you will want to go with a transaction professional when selling your business. It’s also a good idea to mention that your sale will likely be an asset sale, not a stock sale. In Small Business, most attorneys will know this but if your business bids a lot of work or has contractual work in progress, like construction companies for example, it could take the form of a stock sale and be more complicated. There are also “neutral” closing services run by attorneys who will prepare the documents and help the deal close. Similar to a transaction broker, they typically work by handling earnest money, documents, due diligence and closings and can genuinely help the deal along while the buyer and seller make the decisions.
- Use Common Sense
Pick pros who do this for a living and watch out for pretenders. If you own a small widget company and a venture capitalist, investment banker, attorney or real estate broker generously offers to take you to market… find another ride.