As the managing director of a Pittsburgh based lower-middle market mergers & acquisitions company I hold a special outlook on the business transaction marketplace, the consultants offering you their services and the questions you ought to be asking to be certain that you hire the ideal business broker / intermediary to represent your business available.
The most important point to remember when interviewing prospective business brokers is it is the task of whomever you hire to CREATE A MARKET FOR and finally SELL your business. This might appear rudimentary. However, it has to remain at the heart of your agent selection process to guarantee the most effective intermediary is hired to represent your business available.
Does the person you’re interviewing have the capability to successfully create a competitive marketplace for your business and secure the best possible buyer for the business? Unlike owning stock in public businesses, property or other investment vehicles in which an energetic, public market exists to divest your ownership share, no readily available market now exists for the ownership transfer of your privately held business. Therefore, it’s the fundamental obligation of the representative you employ to make this market for you.
How can you determine if the person or firm you’re interviewing possesses the capacity to create an active marketplace for your business?
Here’s where I suggest you focus your efforts:
– How can the business broker or intermediary plan to promote your business for sale? Will they just post it to the internet and hope that’s sells? If that is the case I strongly suggest you consider another direction. Successful intermediaries will take an active approach to promoting your business. Along with listing the business available on available internet sites, successful agents will:
1. Contact strategic business buyers confidentially asking about their interest in a potential acquisition.
2. Present your business to an internally maintained database of strategic and financial buyers.
3. Contact other regional professionals (accountants, lawyers, etc.) to supply them with a confidential breakdown of the businesses they’re offering for sale and ask whether any prospective customers may have an interest.
4. Work with other business brokers and business intermediaries to cross-pollinate deal flow. Example: If an intermediary from ABC Business Brokerage is working with a buyer for a supply company and a different business broker from XYZ Business Brokerage is working with the vendor of a distribution firm, just the intermediaries working together will discover the fit. Not all agents will collaborate with other intermediaries. Click here to learn more about Alberta business brokers.
Now for my list of warnings:
– Don’t get hung up on the business agent’s experience in your industry. Any intermediary value his commission that doesn’t currently possess experience in your business will seek it. The value of industry experience will be different based on the size and industry of the business. However, it’s important to recognize that business experience is secondary to whether you think in the intermediary’s ability to successfully create a marketplace and consummate a sale for your business.
– Price shouldn’t be the deciding factor on who you employ. Bear in mind the old adage, you get what you pay for? Do not learn this lesson when selling the largest and most valuable asset that you have. Work through the process detailed above and employ the ideal person for the job, not the cheapest.
– Do not have the individual selling the business function as one to opine to the value. I’ve seen a great deal of brokers try to value businesses. My advice, be careful with this approach. Unless your business is so small that there isn’t any cost / benefit to hiring a licensed, independent third party for the evaluation, I’d advise that you do so. Knowledgeable buyers won’t find comfort in a value based on your hired agent. An independent, accredited, third party is vital. Accrediting agencies include: The American Society of Appraisers, The Institute of Business Appraisers and The American Institute of Certified Public Accountants.
Your business is for all intents and purposes the biggest and most valuable asset that you have. Selling it can be an extremely emotional and stressful procedure. When choosing a representative to deal with the sale, take some opportunity to interview numerous intermediaries. Compare and contrast their styles, methodologies and work ethics. Do not get blinded by the price as most good intermediaries will readily cover their own fee through the added value they’ll bring to your trade. And bear in mind, hire the person that you believe is best satisfied and motivated to produce a market and complete the sale of your business in the most potential selling price.