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Owner / Representative Partnership
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Owner / Representative Partnership

Aug 17, 2020 by The Montana Group 0 Comments ,
Owner / Representative Partnership
 
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.
 
Before Choosing a Consultant to Sell a Business
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Before Choosing a Consultant to Sell a Business

Mar 24, 2020 by The Montana Group 0 Comments ,
BEFORE choosing a Consultant to Sell a Business:

Of course, the idea of selecting someone to sell a major asset, a business, is something that is extremely important and could be daunting. However, addressing these considerations should be helpful before making the selection. Make site to check their personality as it is also important to enjoy working with the consultant. The process requires working closely together for months.

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 the 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 upcoming 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 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 not be 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 owners who sold their business through this intermediary. It is particularly helpful if that business is of similar size.

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 $1 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).
2019 Conditions for Selling a Business
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2019 Conditions for Selling a Business

Nov 8, 2019 by The Montana Group 0 Comments , , ,

2019 Conditions for Selling a Business

There are a number of cyclical factors that affect the optimum time to sell a business. Of course, is the business doing well? Are the revenue and sales trends upward? Does the future look bright? Other factors include the motivation and industry focus of buyers, as well as, their funding rates and availability.

Currently (2019), the private equity buyers are numerous, well funded with unused cash, and a hungry appetite left over from the slow years of the recent recession. This coupled with historically low interest rates and an easing of commercial borrowing make the demand side of the transaction very favorable to a seller. IF the potential seller’s business is preforming well then now is a great time to sell. Performing well means are the business’ earnings growing from increasing sales, are the continued growth opportunities likely and evident, and are the product or service margins not contracting. When these factors are inline the seller’s representative is in a position to sell the business on the present and also on the near term future rather than on a historical earning formula which includes recessionary years that would reduce the sale price.

An accomplished business brokerage consultant like The Montana Group (www.montanagroup.com) will know of the best method for selling the business. Occasionally, the most advantageous buyer is a company within the selling company’s focus. This is known as a strategic buyer as there are strategic reasons to be buying the business. While this seems a logical place to negotiate, these buyers are often not aware of the current rates for purchasing a business and thus their offers are deficient.  The other type of buyer is the financial buyer who is interested in buying a good business with a definable upside and can be purchased at a price that is consistent with the cash flow multiples currently paid for such companies. The Montana Group does not charge a retainer so it’s success-based only fee is motivating.

When Selecting the Advisor to Sell your Business?
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When Selecting the Advisor to Sell your Business?

Aug 21, 2019 by The Montana Group 0 Comments , ,

The spectrum of business intermediary is vast. There are those who are members of nationwide networks who can blast a company’s information throughout the country and abroad. There are those who believe the ideal method when locating the potential buyers should be a selection based on their acquisition history, their current acquisition interest, their ability to fund the transaction, and their overall success with their previously acquired businesses. This tier tends to include those that focus on businesses with a value greater than the aforementioned nationwide network model and is the focus of The Montana Group. (www.montanagroup.com) 

The relevant questions to help someone determine the most qualified and best fit for a business owner are based on the intermediary’s experience and how a company will be marketed. A review of completed transactions to determine the size range, geographic and industry focus of their completed transactions, an understanding of services offered and fee structure, the duration of their listing agreement and ability to cancel, the makeup and depth of their buyers, and the level of their involvement throughout the sale process will help in the selection. Also, who specifically will be working on the transaction and their experience and qualifications?

The optimal situation would be to obtain a full and fair proposal that assures the remaining employees that their future with the company continues to remain bright. Generally, those employees that are very good will be critical to the business going forward and will be treated very well by the new owner.  Often the buyer will want the seller top remain for a period of 1-5 years with a minority ownership but this is determined by the seller’s preference. The intermediary should further define the potential acquirer based on this preference as most buyers have a preference.

Often the company owner has a few potential buyers within their industry who have made it clear that they have an interest in acquiring that business. It is rarely a situation that does not require a business broker consultant, as the buyer will realize that due to the representation there must also be other interested suitors outside their industry who are difficult to predict and therefore an opportunity to purchase the business below market should not exist. The fee paid to the consultant should be return in multiples if the selected intermediary is successful.

“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 with this specific focus tells us that often the owner is reducing the sale price in multiples over the money saved from not paying a success-based consulting fee.”, says Emmett Barnes, President and Founder of The Montana Group.