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Tag: Business Broker

Which Business Brokerage Consultant?
Business Broker Newsletter, Business Brokerage Consultant, Selling a Business

Which Business Brokerage Consultant?

Jan 4, 2019 by The Montana Group 0 Comments
Which Business Brokerage Consultant?

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 sure 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 up 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 $2 million in pretax this is a great time to consider selling. There is significant 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).
Sell a Business without an Advisor?
Business Broker Newsletter, Selling a Business

Sell a Business without an Advisor?

Sep 3, 2018 by The Montana Group 0 Comments , ,
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.

Business Valuation Factors
Business Brokerage Consultant

Business Valuation Factors

Dec 6, 2017 by The Montana Group 0 Comments , ,
There are many complex formulas in expensive business valuation software that spit out reams of data on the value of a private business. This data is certainly interesting and can be helpful in determining price expectations but this is an inexact science, at best.  While this valuation approach is necessary and helpful when there are estate issues or legal issues such as buy-sell disputes the only answer is that a business is worth what a buyer is willing to pay at the time the business is for sale.
To formulate a ballpark answer to this question the following would be helpful:
  • Who is the buyer?
  • What is the buyer’s motive?
  • What is the buyer’s experience in making acquisitions?
  • What is the buyer’s financial strength?
  • What is the buyer’s concern with their competition for this purchase?
  • The Buyer’s recent acquisition activity in this type of business.
  • Are there many similar companies available to purchase?
  • What are the future growth opportunities of the company?
  • Proprietary products?
  • Barrier to entry?
  • Management post-sale?
  • Is there competition or perceived competition on this acquisition?
Does the business’ representative have a large database of potential acquirers?
Of course, private businesses are not often publicizing their sale price so it’s rare that there is a comparative sale to review. Even if this information were available the question would be does this buyer want to buy another company? Is buyer more or less motivated to buy another company? How about the unsuccessful potential buyers – are they more motivated now to increase their valuation? Comparing a private business’ value to a public company in the same line of business seems a stretch as larger businesses trade at significantly higher multiple and the same can be said for publicly traded ones.
So, the answer…… “you need a good representative to properly present the company to facet of the buyer market that would likely have an interest in the company and wait and see. However, this representative should be able to provide an accurate complimentary valuation range that can be used to determine if the owner is now a seller”, per Emmett Barnes, President of The Montana Group (www.montanagroup.com).
Preparing the Company for Sale
Business Broker Newsletter, Business Brokerage Consultant

Preparing the Company for Sale

Nov 7, 2017 by The Montana Group 0 Comments

The prudent outlook of the Business Owners:

As is often the case, business owners are totally focused on the constant issues of running their business. However, if they are contemplating the sale of their company it is time well-spent to contemplate their business value in the eyes of the ultimate buyer.

The cash flow that the business generates is KING, as this almost single-handily determines the value. The “almost” comes from other considerations like the balance sheet, the barrier to entry, and growth opportunities … to name a few. Therefore, their cash flow needs boosting, if practical, and this, of course, comes from either increased sales or reduced expenses. The business owner may determine this will require some difficult changes (e.g. termination of an employee, expansion) and prefer that the new owner make the tough decisions. However, it should be understood that the transactional valuation will rarely include savings that have not been reflected on the income statement.

Irreplaceable business owners makes a business much less valuable to a buyer! It is imperative for business owners to understand that if after the sale there is no involvement in the business potential new owners will be concerned with who they will hire to take over. If the buyer is an industry buyer (strategic) there could well be someone within the buyer’s organization who can run the newly acquired company. However, if the buyer is a financial buyer this candidate can be more difficult to locate. Therefore, if the seller has an interest in running the company post-sale or if there is someone within the organization that is either now in-charge or is capable of running the company, then the buyer will more confidently move forward and enhance their valuation.

Growth opportunities that should positively affect the company’s revenue are exciting and powerful. In most cases, the potential buyers are buying based on a value derived from the business’ historical numbers but are using their own projections based on their assumptions for future growth. This growth fuels their optimism about the investment and therefore pushes the value upward. So, expansion opportunities such as additional products, additional sale territory, and additional sale force, as well as, improvement in overhead costs etc result in increased enthusiasm for the potential buyers. Enthusiastic buyers equates to better offers.

Bottom Line: “Business owners should look at their business as they would if they were the buyer so focus on improving the cash flow and be ready to discuss the future growth opportunities”, says Emmett Barnes, President of The Montana Group (www.montanagroup.com).