How The Montana Group helps the business sell
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The Common Elements of our Clients
The Common Elements of our Clients
These businesses were in the manufacturing, distribution, and service sectors and were located throughout the US, with a concentration in the southern part of the country. They also fall within the size range, of $1 million minimum in pretax profits. These businesses have good growth trends that exhibit an increase in sales accompanied by a commensurate increase in pretax profits. There is also an opportunity to increase the business’ revenue in the future, either from internal growth from an increase in market share, an expansion in geographic territory, the addition of products offered, or through a strategic acquisition. The existing management, either the prior owner or newly elevated existing management, is involved with the business after the sale and often receives ownership in return for their future successes. These businesses have a niche that makes them desirable. These niches were a desirable geographic territory, a product with little competition which is reflected in desirable margins, a large market share of a small market, a specialized service that is difficult to duplicate, or simply a nimble company filling a need with a quality product.
The owners were often in a position in their life that selling their business allowed them to retire at the sale or gradually retire over a few years while the sale allowed them to make liquid their largest and most significant asset. By working with The Montana Group these companies were paired with the appropriate buyer who met the owners’ various objectives. Our clients appreciate the risk that we take when we are willing to work on the sale of their business and are only paid when the business is sold. This confirms that we are confident in an outcome that meets (or exceeds) their objectives.
“While we would like to assist all business owners in their quest for selling their business we must select those that line up well with our focus and experience. We have successfully guided our clients, the business owner, throughout the pre-sale issues until the actual sale, often our consulting has resulted in substantial increases in the sale price. We will gladly provide a complimentary assessment of the likely sale scenario and after engaged we will use our many years of experience to address the various issues that could improve the overall transaction.” says Emmett Barnes, President & Founder.
Sell a Business without an Advisor?
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.