Selling a Business: It’s Important to Answer these Questions on Who
Of course, the idea of selecting someone to sell your business is something that is extremely important and could be daunting. However, addressing these considerations should be helpful before making the selection of a representative.
The firm’s list of completed transactions is of interested but make sure to review a list of completed transactions that were the responsibility of the person assigned to sell your business. Also, determine what role this person will fill and what other people will be involved in the transaction and their individual experience for their specific responsibility.
Does the listing agreement benefit the consultant even if there is no sale? If this is the case, is this arrangement the proper motivation? If the consultant is confident in a sale, is a retainer fee necessary? Can the listing agreement be terminate at any point without penalty? It seems mutually beneficial to discontinue a relationship that is not working toward the stated mutual goal.
Get an understanding of how your business will be marketed. A shotgun blast to the masses will often get rumors started, which could be negative to employees, beneficial to competition, and often not effective. Do you want to approve all potential buyers BEFORE they receive anything on your company? Is the intermediary’s buyer database extensive and specific enough to contact less than twenty buyers whose acquisition criteria specifically make your business likely to be of interest? This selective buyer focus will help reduce the opportunity for “the company is for sale” rumor and yet often obtain the financial objective…. quietly. There are, however, times that the “wide net approach” is best.
Does the listing agreement properly motivate the consultant to exceed the business owner’s price objective? This can be accomplished by agreeing to a flat fee to the minimum acceptable price with a higher percentage on that amount that exceeds this minimum.
Check references from past clients who sold their business through this intermediary. It is particularly helpful if that business is of similar size and industry type. Make sure to check their personality as you will be working with the consultant closely for many months.
Your consultant should approach the confidential sale process from the perspective of the owner/seller. This means a genuine interest in finding the best fit for the transaction goals and also for the company post-sale.
Now that private corporate earnings are trending upward, a focus on selling a business is certainly more prudent. Particularly so, when well-funded buyers are numerous, the interest rates for acquisition debt is historically very low, and the recent economic improvement makes the business’ future appear brighter. In conclusion, “If your business is performing well financially and the business is making at least $2 million in pretax this is a great time to consider selling for there is pent-up demand from the buyside and the availability of companies to invest in is still lower than normal” says consultant Emmett Barnes, President of The Montana Group (www.montanagroup.com)