Business Brokers

Negotiations can often be both perplexing and delicate. A simple misstep can jeopardize what could have been a great deal. One key but often overlooked tool in any negotiation is to pause and consider the wants, needs, and desires of the other party. Contemplating the ideal outcome for them can work wonders.

Understanding what motivates a buyer is crucial for a successful outcome. At the beginning of the sales process, it’s unlikely that you’ll know what your buyer really wants. This lack of knowledge about their desires, values, and standards presents a challenge, especially in the initial stages. Essentially, you’re operating with limited key information at the negotiation’s onset, necessitating caution.

One effective approach is to emphasize the strong financials of the business. Emphasizing a business’s sound financial footing is generally well-received. Whether a buyer is a former corporate executive or from another background, highlighting a strong return on investment (ROI) is prudent. Additionally, most buyers prefer a business that won’t disrupt their current lifestyle.

Understanding what a buyer expects from you post-sale is crucial. Some may want the previous owner available to assist during the transition period, while others, particularly those familiar with your industry, may require less post-sale involvement. Knowing their expectations can help you adapt your approach accordingly. Some buyers may seek your expertise, while others have their own ideas for running the business. Understanding their direction can aid negotiations.

Emotions play a significant role in business transactions. Buyers are often excited about the prospect of purchasing a business, especially in the initial stages. However, it’s essential to maintain a realistic and grounded presentation and approach. Overselling the business can backfire, as it can lead to later disillusionment from the buyer.

Sellers should consistently consider what buyers want. While all buyers seek a successful business, their motivations and perspectives can vary widely. Tailoring your approach to each buyer and understanding their motivations can lead to positive outcomes. With their extensive experience, business brokers and M&A advisors can provide valuable insights into buyer motivation.

Copyright: Business Brokerage Press, Inc.

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Most business owners are experts at running their specific businesses. They are not necessarily experts at selling businesses. This is where working with a seasoned brokerage professional can prove to be invaluable. 

As it turns out, there are endless examples of people trying to save money by simply finding an MBA to handle the sale of their business. Owners often will trust this person despite whether or not they have direct experience selling businesses. Sadly, the results from this decision can be very poor. 

Table of Contents:

• Missing Legal Arrangements
• Incomplete Documentation
• Failure to Properly Screen Candidates

Let’s take the example of a business owner who opted to let his nephew with a freshly minted MBA oversee the sale of his multi-location retail operation. The idea was that his nephew would help him save a great deal of money. Unfortunately, this idea simply didn’t work. His well-intended nephew’s inexperience proved to be a liability. 

Let’s take a look at some of the main problems that this business owner and his nephew faced:

Missing Legal Arrangements

One of the first problems is that neither the business owner nor the nephew realized how important confidentiality agreements were to the process of selling a business. This led to competitors learning that the business was for sale. Likewise, the lack of confidentiality agreements meant that everyone from key employees to clients, customers and suppliers could learn that the business was for sale.

Further, the nephew opted to use the company’s attorney instead of finding an attorney with experience in business transactions. The company attorney had never handled the sale of a large business before.

Incomplete Documentation

Another problem was that the nephew prepared what was supposed to be a Confidential Business Review/Confidential Information Summary – CBR/CIM. The review/summary prepared by the nephew failed to include proper financials, including a large sum taken by the owner. Importantly, there were no projections, ratios and other important information. This lack of information could easily lower the bids or simply cause prospective buyers to lose interest.

The way that the business owner and nephew handled the CFO was also an issue. They failed to bring in the CFO and did not execute a “stay” agreement. The nephew was confident that he could handle the financial details on his own. However, neither the owner nor the nephew realized that prospective buyers expected to meet the CFO as part of the due diligence process.

Failure to Properly Screen Candidates

Finally, not only did the nephew not understand the importance of confidentiality agreements or the due diligence process, but he also failed to understand the importance of the screening process. The nephew failed to interview prospective buyers to discover whether or not they were serious and had the resources to buy the business. The failure to have a proper screening process served to both waste valuable time and spread the word that the business was for sale.

For most people, selling a business is the single most important financial decision of their lives. For this reason, it is critical to find experienced and competent assistance for the process. An experienced business broker or M&A advisor understands what is involved in selling a business. In other words, your nephew may be a great guy and he may want to help you, but without years of experience selling businesses, he simply isn’t the right person for the job.

Copyright: Business Brokerage Press, Inc.

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Great deals can quickly be derailed when confidentiality agreements are not properly used and observed. The number of headaches that can occur due to a failure to follow the requirements of a confidentiality agreement are rather extensive. Whether it is employees discovering the potential sale, to the loss of key customers or even alerting a competitor that your business is for sale, there is no end to the headaches that can arise when a confidentiality agreement is not in place or adhered to. Simply stated, adhering to confidentiality is one of the most important aspects of the entire sales process.

Thanks to a well-constructed confidentiality agreement, sellers can enjoy protection from the disclosure of critical and confidential information during the sales process. While confidential agreements may have originated as a way to safeguard against prospective buyers revealing information about a seller’s business, these agreements have evolved to consider numerous seller concerns. 

A good confidentiality agreement helps to protect all sorts of important details that may be revealed during the sales process including trade secrets and proprietary information. It can also outline the fact that a prospective buyer will not attempt to hire away key employees.

Considering the importance of a confidentiality agreement, it is well worth the time to create an agreement that covers all key areas. Everything from how confidential information should be shared to how breaches in confidentiality should be remedied must be addressed by a confidentiality agreement. It is not prudent to cut corners to save money and time when drafting a confidentiality agreement, as it is likely one of the most important business documents your business will ever create.

Just as no two businesses are the same, this fact holds true for the content of important legal documents. The sale of every business is a unique situation, and for that reason, every confidentiality agreement must be tailored to fit the precise circumstances of the business.

Business brokers and M&A advisors are experts in the buying and selling of businesses. Part of that expertise extends to the creation and execution of confidentiality agreements, which are also sometimes referred to as non-disclosure agreements. 

At the end of the day, the last thing any business owner wants is for key information regarding their business to be revealed. Working closely with a brokerage professional is an important way for sellers to safeguard their confidentiality throughout the process.

Copyright: Business Brokerage Press, Inc.

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Experts recommend that sellers prepare years before they plan to put their businesses up for sale, and there are many good reasons why they make this recommendation. A wide range of factors can interfere with the sale of a business, ranging from life changes like divorce and burnout to a new competitor moving into town. Preparing to sell your business in advance will help prepare you for the day you need to sell, whenever that day may be. Now, let’s take a look at a few of the surprises that sellers may face when selling their company.

Time Commitments

Topping the list of surprises that sellers often face is the time commitment involved. As almost any business owner will tell you, it takes a tremendous amount of time and effort just to run a business. Adding the additional variable of putting a business up for sale can be a real strain on a business owner’s time and resources. The idea that one can simply put a business up for sale and “the rest will take care of itself” is very rarely the case. 

Most businesses take many months or even years to sell, even with considerable effort put into the process by both the business owner and brokerage professionals. Prospective buyers can take up a considerable amount of time to deal with, and this is one of the many reasons it is important to work with a business broker or M&A advisor. A competent brokerage professional has expertise in determining if a potential buyer is worth the time, effort and money it will cost by you and licensed Deal Team professionals such as attorneys and CPAs – vetting a buyer’s ability to close on the sale of your business – saving you a great deal of time and aggravation.

Documentary Requirements

Sellers are often unaware of just how much documentation must be compiled for the Confidential Business Review (CBR) alone. However, the CBR is key in the selling process. If you’re selling your business shortly, be prepared to compile, create and review a lot of documents. 

Shared Decision Making

Of course, many other variables must be considered when a seller makes the decision to sell their business. Minority stockholders or family members with an interest in the business must be taken into consideration. 

Typically, sellers are accustomed to handling most of the key decisions regarding their business. This approach might work for running a business, but it can be quite challenging when it comes time to sell. Everyone from members of the management team to lawyers, accountants, and, of course, business brokers or M&A advisors, must be involved in the process. 

Owners simply cannot realistically handle every aspect of getting a business ready to be sold. Usually, the requirements of the sales process are too diverse and complex to be handled effectively by one individual.

While the above-mentioned surprises are often the most common, a wide range of other factors can be unexpected. These factors range from sellers accidentally decreasing the value of their businesses due to failing to maintain normal business operations during the sale, which can decrease the value of the business, to confidentiality leaks. 

Selling a business is a complex process. Many business owners feel that since they are accustomed to the complexities of operating a business that they can handle the complexities of selling a business. The reality of the situation is quite different. 

Copyright: Business Brokerage Press, Inc.

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No business is perfect, but when you are preparing your business to be sold, it is imperative that you lead with your strengths. That’s why it is important to work with a business broker or M&A advisor to identify, catalog, and work to remedy any weaknesses. When presenting your business to prospective buyers, focus on your key selling points first and what makes you really stand out from the crowd. You want to sell a prospective buyer on the value of your business and its long-term potential before addressing any shortcomings or areas that need to be improved. 

Most business owners who are selling a business are doing so for the first time. If you’ve never sold a business befor,e then there are many mistakes and traps that can befall you. Selling a business is typically not a fast and easy process, but can instead take many months or even years. 

Working with a business broker is one way to ensure that the process goes smoothly, but there are other steps that you can take to help ensure that your business sells. At the top of the list of steps business owners can take to help their business sell is to maintain normal operations. Again, it is very unlikely that your business will sell as soon as it hits the market. To protect the value of your business and to avoid financial trouble, you have to maintain normal business operations throughout the sales process.

The next key step to take is to get your business ready. It likely took years, or even decades, to get your business to where it is today. You shouldn’t expect that preparing your business to be placed on the market should be an overnight process. One of the best ways to properly present your business is to inspect every aspect of your business and its operations. In this way, you’ll discover what areas need work and what strengths are best to promote. 

Brokerage professionals know where the competitive advantages of businesses reside and have an understanding of what buyers really want. An incorrectly priced business can scare away otherwise excellent potential buyers. The same holds true for poorly organized paperwork and financial records. In short, the preparation you make now to sell your business later can be invaluable for achieving the results you seek.

At the end of the day, you must remember that selling your business is a financial transaction. Like all kinds of sales, you must understand not only what the buyer needs but what they want as well. Not every business is right for every buyer. 

Copyright: Business Brokerage Press, Inc.

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There is no underestimating the importance of negotiation when you are buying or selling a business. Let’s take a look at some of the most often used strategies and our recommendations. 

The Direct Approach

One approach in negotiations is what we often refer to as the “take it or leave it” strategy. In this scenario, the buyer makes an offer, and the seller then counters that offer. There is little negotiation work necessary, as both parties are direct and simple about the numbers and terms they propose. The drawback to this approach, however, is that when it doesn’t work, there is little to no recourse. When this “direct approach” offer isn’t accepted by one of the parties, there is little opportunity for flexibility on either side. Therefore, the direct approach can be somewhat of a risk.

Focusing on Influential Details

There are typically certain aspects of a deal where a buyer or seller is unwilling to compromise. Sometimes this aspect isn’t even financial in nature. It could be anything from the desire to move the business to a new site, to employment of a friend or relative. Once the negotiations embrace and include these non-negotiables, it can help expedite a successful deal. 

Splitting the Difference

A common approach that is seen when buying or selling businesses is that one side offers to split the difference. Unlike the direct approach, there is a good deal of flexibility here. When one party shows that they are open to split the difference, it is often seen as a way to keep negotiations going. Another point in favor of this approach is that communication continues. Obviously when one or both sides stop talking, the deal has not been successful. 

Third Party Involvement

When it comes to finding solutions and resolutions, having a third party involved is tremendously beneficial. When you bring in a business broker or M&A advisor, that individual can then help facilitate the negotiated solutions. This third party is seen as skilled, yet also more of an impartial party. Business brokers and M&A advisors also have many years of experience encouraging buyers and sellers to understand and work with one another. 

Your brokerage professional can help both parties agree to a fair price while handling the aspects of all the small details involved in buying and selling businesses. Negotiations almost always benefit from having a professional involved, as they bring a different, and much needed, perspective to the table. 

Copyright: Business Brokerage Press, Inc.

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No one wants to waste their time and energy trying to sell their business to someone who isn’t actually planning to buy. That’s why it’s so important for you and your business broker or M&A advisor to focus on the most qualified and serious buyers. But how can you really make these kinds of assessments about a buyer’s viability until they sign on the dotted line? Let’s take a look at some signs that will help you figure out your buyer well in advance. 

Do They Have a History of Ownership?

When someone has owned a business in the past, they have a firm understanding of what is involved. As a result, they are more likely to be a serious buyer. It also means they are more likely to move forward. You will also find that they have the ability to make a substantial down payment and financing options. While they might want you to help them with financing, you should still be looking to ensure they will put their own capital at risk as well. 

Are They Seeking Information About Your Cash Flow?

If a buyer is serious, it goes without saying that they will want to make sure the business is profitable. They should be asking a lot of questions about not only your cash flow, but also your inventory.  If you have unusable inventory this could be of concern to a buyer. Be sure to disclose this information upfront, as it will likely be discovered in the due diligence process regardless.  

Are They Asking About the Health of Your Staff?

Any real buyer would want a dedicated and reliable staff. If your buyer is asking about salaries, it is a good sign that they are serious. After all, if you’re only paying minimum wage, chances are that your staff will not have a lot of staying power. These days, many companies are suffering due to staffing issues, and it’s something that should be front and center in any serious buyer’s mind.

Do They Have an Interest in the Industry?

If your prospective buyer is asking questions about the industry, that is another good sign. After all, who would really want to buy a business without detailed knowledge about the industry they are about to enter? Along the same lines, if you know your buyer has experience in a given industry, it means they are more likely to go through with a purchase. If they lack experience in your industry, do they at least seem passionate about the industry? If they seem like they are not asking probing questions, this might mean they are wasting your time.

Are They Asking About Capital Expenditures?

Your prospective buyer will want to know how money is being spent. You can expect them to make sure that major expenses have already been paid for as they will want to make sure they won’t be caught off guard by large pending purchases.

Do You Have Professional Assistance?

The bottom line is that the more in-depth questions a person is asking, the more serious they are likely to be. Your business broker’s job is to screen prospective buyers. Years of experience doing so helps them know the warning signs that pop up when buyers profess to be interested, but are not likely to go through with the sale. 

When you are trying to sell your business, it is critical that you focus your time wisely. Your brokerage professional will help ensure that you do not waste time working with people who are just kicking the tires. 

Copyright: Business Brokerage Press, Inc.

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There are clearly qualities that make a person an ideal candidate to be a business owner. On the other side of the coin, however, it’s clear that owning a business isn’t for everyone. Let’s take a look at some of the unique personality aspects that help motivated individuals identify owning a business as a good fit for them. 

You Seek to Guide Your Destiny

A common reason people become business owners is that they want to have more control over their lives. After all, if you’re working for someone else, your fate is never truly in your own hands. You can always be fired or let go. When you are a business owner however, not only do you have control over your job itself and the tasks you accomplish on a daily basis, but you can also determine who you work with and where you work. You also need to have optimism to keep working with the belief that things are moving in a positive direction. 

You are Comfortable with Risk

When you take the role of business owner, you invite a certain degree of risk into your life. That means you are responsible for the success of your business, and you will also have a team of people depending on you. That’s why it’s so important to have a clear vision for the business before you take on the responsibility. You are likely to invest a great deal of your own money into the venture. You may even have to put up valuable assets as collateral, such as your house. You may also have to make sacrifices such as taking a reduced income as the business gets off the ground. It’s important for business owners to possess the inner strength to stay motivated and on track to keep the business growing. 

You are Motivated

People who make good business owners are typically inspired by the idea of growing their income, and they are willing to put in the work to achieve that goal. The idea of making key decisions to grow their business is something they find exciting. The truth is, the longer you own your business, the more money you will make. Often you will have to exercise patience in order to reap the financial benefits you’re seeking. 

You are Collaborative

Not everyone is great at collaboration. As a business owner, however, you will need to work well with others for the business to be a success. It’s rare to do everything on your own. That’s why you need to be a good communicator and will need to be talented at managing others. Great business owners are bosses who are disciplined, self-aware ,and able to operate comfortably with a high degree of vulnerability.  

Before you decide to own a business, it makes sense to do some self-reflection to ensure that your personality really does lend itself to being a business owner. If you have questions about what owning a business entails, be sure to discuss this topic with a business broker or M&A advisor. 

Copyright: Business Brokerage Press, Inc.

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