Month: September 2018

Sell a Business without an Advisor?

Often a business is owned and/or run by a very good negotiator so; why not just sell it without a broker, especially when the competitor is knocking? After all, the fee can be saved and how difficult can it be? Don’t you really just photocopy the financial statements and wait for an offer? Can’t the company lawyer or CPA just take care of it as he/she has taken care of about any and everything up to this point?

The answer is yes the business owner can and often does complete the sale of the business without a broker. But, the goal is not just completing the sale. Isn’t the goal completing the sale with the best possible overall transaction? This means not only maximizing the after tax cash but also maximizing the “extras” such as deferred compensation, non-compete agreement, carried interest in the company going forward, and post-sale employment agreements. As a company’s balance sheet changes daily, these fluctuations during the time of negotiations need to be included. It’s a moving target! Plus, most (if not all) private businesses expense certain items that in effect reduce the company’s tax liabilities yet are not really necessary in the operation of the business. These obvious expenses plus more innovative ones that can be justified and added back in recast financial statements could have a substantial positive effect on the overall transaction. A good business broker is aware of these enhancements and a large percentage of the time the overall transaction increase from these “add-backs” is much greater than the fee paid the business broker. Also, a good business broker will know what information is normal to provide and in what format (e.g. Customer Lists). Would it be helpful to know if the buyer Is simply over the line in its requests?

Now let’s also be realistic. Even if this buyer is indeed the buyer of choice for the business (and ultimately buys it) does it make sense to sell the company under the market value to them? Will a competitor who thinks they are allowed to buy the company without other buyers to compete with really offer a full price? Would you? Then buyer will also get the financial benefits of the easy elimination of unnecessary expenses, not the seller.

There are many former owners who wish they had not been “penny wise and pound foolish”. As the owner will only be selling their business once isn’t it simply prudent to have someone driving the transaction that has many years of successfully negotiating transactions … not learning as they go along, as the business owner who has never sold a business would be.

“Selling a business is a once-in-a-lifetime and lifestyle change that often affects multiple generations. So, use a specialist with years of experience. While this can be done by the business owner in an attempt to be frugal, our 25+ years of this specific focus tells us that often the owner is reducing the sale price in multiples over the money saved from not paying a consulting fee.”, says Emmett Barnes, President and Founder of The Montana Group.