Owner / Representative Partnership

Selling a business
Helpful Business Practices
January 13, 2017
Current Conditions for Selling a Business
Current Conditions for Selling a Business
March 12, 2017

The process of selling a business requires the mutual confidence between the owners and their representatives. It is essential that this go both ways. The owners are probably selling their most valuable asset and a similar sale will likely never happen again for them. The representative needs to feel as though their client does not begrudge the fee but understands and embraces the mutual benefits by properly incentivizing their representative.

The theme of this relation is that everything of financial benefit to the sellers should be part of the fee calculation. This obviously begins with the business’ sale price but extends well beyond. This could include additional money from a closing working capital balance sheet improvement, from personal asset that are in the business but are distributed to the seller at closing (e.g. car), or from something unique to this particular company. Also, incurring expense savings such as the assumption of interest bearing debt by the buyer is an important enrichment. Sellers must make sure their representative feels very confident that even if a financial benefit is not specifically listed in the fee schedule that the owner’s philosophical desire is to pay for what is received.

The incremental increases beyond the agreed upon purchase price is what makes it critical when selecting a representative. A representative that is very good often more than pays their transaction fee with incremental increases over and above the sale price, often in areas that would not be known by a company owner who has no experience in where to locate them. This also amplifies why an owner, rather than attempting to sell the business directly, needs a very experienced consultant who through many many closings knows where to find the extra benefits. The same can be said of the owner’s accounting and legal advisors who’s training and daily focus is not on selling businesses. In summary, the representative/consultant needs to offer a fee agreement in such a manner as to participate from the various ways to escalate the overall financial benefits to the sellers, which is the intent of a mutually beneficial relationship.