| 10 QUESTIONS TO ASK A PROFESSIONAL | | | | techniques, including ratios based on sales of |
| BUSINESS BROKER | | | | similar businesses, as well as the historical data of |
| 1. How will you market my business? | | | | the type of business for sale. |
| 2. How much do you think I should ask for my | | | | Marketing and advertising. |
| business? | | | | The professional business broker is key to the |
| 3. How will you show my business? | | | | marketing of a business. He or she will prepare a |
| 4. Do you cooperate with other business brokers? | | | | marketing strategy and offer advice about |
| 5. Will you display my business on any Internet | | | | essential marketing tools: everything from a |
| sites? | | | | business description to newspaper advertising. |
| 6. How often will you contact me about what is | | | | Business brokers, through their data bases of |
| going on? | | | | buyer prospects, professional associations and |
| 7. Can you provide any references? | | | | other networks, can get the word out about the |
| 8. Are you affiliated with any business brokerage | | | | business far more effectively than any owner |
| associations or trade groups? | | | | could manage on an individual basis. |
| 9. May I have a sample copy of your listing | | | | Presenting the business. |
| agreement? | | | | The professional business broker is experienced in |
| 10. Can you please tell me about you and your | | | | handling the typical objections and negative |
| firm? | | | | "readings" many typical buyers will raise. Does the |
| SELLING - WHAT DOES AN INTERMEDIARY | | | | business lack parking space? Is its location less |
| EXPECT FROM YOU? | | | | than ideal? The business broker has the skills to |
| If you are seriously considering selling your | | | | balance negatives with positives, or to point out |
| company, you have no doubt considered using | | | | that what appears to be a disadvantage is not |
| the services of an intermediary. You probably | | | | always the case. In addition to skill, a business |
| have wondered what you could expect from him | | | | broker also offers the seller convenience. Sellers |
| or her. It works both ways. To do their job, | | | | often fail to visualize the number of buyer calls |
| which is selling your company, maximizing the | | | | they would have to field if handling the sale on |
| selling price, terms and net proceeds, plus handling | | | | their own. The business owner working with a |
| the details effectively, there are some things | | | | broker can continue managing his or her business |
| intermediaries will expect from you. By | | | | at the same time the selling process is underway. |
| understanding these expectations, you will greatly | | | | Negotiating the business sale transaction. |
| improve the chances of a successful sale. Here | | | | The business broker will be the most vital advisor |
| are just a few:o Next to continuing to run the | | | | to sellers during any stage of the sale transaction. |
| business, working with your intermediary in helping | | | | Steeped in knowledge about negotating price, |
| to sell the company is a close second. It takes | | | | terms, and other key aspects of the sale, the |
| this kind of partnering to get the job done. You | | | | broker will guide the seller each step of the way. |
| have to return all of his or her telephone calls | | | | During the early stages, while the buyer is still |
| promptly and be available to handle any other | | | | considering making an offer, the broker is the |
| requests. You, other key executives, and primary | | | | ideal person to follow up and keep the deal |
| advisors have to be readily available to your | | | | running smoothly. Sellers working alone could lose |
| intermediary.o Selling a company is a group effort | | | | bargaining effectiveness by doing the follow-up |
| that will involve you, key executives, your financial | | | | themselves. |
| and legal advisors all working in a coordinated | | | | Mastering the paperwork. |
| manner with the intermediary. Beginning with the | | | | Even though business owners handle mountains of |
| gathering of information, through the transaction | | | | paperwork as a part of doing business, few of |
| closing, you need input about all aspects of the | | | | them have had training in the specialized contracts |
| sale. Only they can provide the necessary | | | | and forms required for the sale of a business. |
| information.o Keep in mind that the selling process | | | | The business broker is an expert at sales |
| can take anywhere from six months to a year -- | | | | transaction details. This expertise will help guard |
| or even a bit longer. An intermediary needs to | | | | against delays, problems, and--that worst of all |
| know what is happening -- and changing -- within | | | | possible worlds--the "wrecked" deal. |
| the company, the competition, customers, etc. | | | | Qualifying buyers. |
| The lines of communication must be kept open.o | | | | The business broker will determine the right buyer |
| The intermediary will need key management's | | | | for the right business, focusing on those |
| cooperation in preparation for the future visits | | | | prospects who are financially qualified and who are |
| from prospective acquirers. They will need to | | | | genuinely (or potentially) interested in the type of |
| know just what is required, and expected, from | | | | business for sale. For locating and qualifying |
| such visits.o You will rightfully expect the | | | | prospective buyers, a business broker uses |
| intermediary to develop a list of possible acquirers. | | | | computerized databases to access comprehensive |
| You can help in several ways. First, you could | | | | lists of local, national and international buyers--all to |
| offer the names of possible candidates who might | | | | increase the chances of selling a business at peak |
| be interested in acquiring your business. Secondly, | | | | value. And, almost as important, to avoid wasting |
| supplying the intermediary with industry | | | | the seller's valuable time. |
| publications, magazines and directories will help in | | | | Maintaining privacy and confidentiality. |
| increasing the number of possible purchasers, and | | | | When a business broker is involved in the sale, |
| will help in educating the intermediary in the nature | | | | bringing to the business only those prospective |
| of your business.o Keep your intermediary in the | | | | buyers who qualify, it is also easier to maintain |
| loop. Hopefully, at some point, a letter of intent will | | | | confidentiality during the selling process. Until a |
| be signed and the deal turned over to the | | | | purchase-and-sale agreement has been signed, |
| lawyers for the drafting of the final documents. | | | | most sellers do not want the word to reach their |
| Now is not the time to assume that the | | | | customers, competitors, employees, or even their |
| intermediary's job is done. It may just be | | | | bankers. A business broker helps by using |
| beginning as the details of financing are completed | | | | nonspecific descriptions of the business, by |
| and final deal points are resolved. The | | | | requiring signatures on strict confidentiality |
| intermediary knows the buyer, the seller, and | | | | agreements, by screening all prospects, |
| what they really agreed on. You may be keeping | | | | sometimes phasing the release of information to |
| the deal from falling apart by keeping the | | | | match the growing evidence of buyer sincerity |
| intermediary involved in the negotiations.o Be open | | | | and trustworthiness. |
| to all suggestions. You may feel that you only | | | | Professional business brokers provide all these |
| want one type of buyer to look at your business. | | | | vital services, and more, for the seller of a |
| For example, you may think that only a foreign | | | | business. This is one time where "do-it-yourself" |
| company will pay you what you want for the | | | | just can't measure up--in terms of money, time, |
| company. Your intermediary may have some | | | | and the general success of the sale. |
| other prospects. Sometimes you have to be | | | | WHY USE A BUSINESS BROKER/INTERMEDIARY |
| willing to change directions. | | | | Business brokers and intermediaries can be |
| The time to call a business intermediary | | | | valuable allies when it comes time to sell your |
| professional is when you are considering the sale | | | | business. Here are just some of the reasons why |
| of your company. He or she is a major member | | | | it pays to work with professional business |
| of your team. Selling a company can be a | | | | brokers:o They help sellers establish a fair asking |
| long-term proposition. Make sure you are willing to | | | | price - fair to the seller and the buyer. There is no |
| be involved in the process until the job is done. | | | | sense going to market with a price that won't |
| Maintain open communications with the | | | | attract serious, potential buyers.o They sift |
| intermediary. And, most of all - listen. He or she is | | | | through potential buyers and show the business |
| the expert. | | | | only to those who are serious about business |
| WHEN BUYING OR SELLING: ATTORNEYS | | | | ownership. About one out of 50 people who call |
| SHOULD BE DEAL-FRIENDLY AND SALE-WISE | | | | about a business ad are really serious enough that |
| Whether you are buying or selling a business, your | | | | they will eventually buy a business.o They work |
| legal counsel can make or break the deal. It is | | | | on a confidential basis so the entire community |
| important that you emphasize to your attorney | | | | doesn't know that the business is for sale.o They |
| that you want the sale to go through. In many | | | | show the business at times convenient for the |
| instances, the sale of the business fails to close | | | | seller and will also take charge of the process.o |
| because the attorney for one side or the other | | | | When a potential buyer shows interest in a |
| makes too many demands of the other side. | | | | particular business, the broker will provide |
| Certainly, you want your attorney to protect | | | | preliminary information on the business, schedule |
| your interests, but not to the point where the | | | | meetings with the seller, negotiate the terms of a |
| demands are so strenuous that the other party | | | | proposed transaction, and will generally work with |
| or his or her counsel balks. If your attorney | | | | the parties until a satisfactory conclusion is |
| understands that you really want to buy--or sell, | | | | reached.o They guide both the buyer and the |
| as the case may be--he or she will be less apt to | | | | seller through all the nuances of the deal, walking |
| make outrageous requirements or demands. | | | | them through the various steps necessary for a |
| Below are some things to consider when dealing | | | | satisfactory conclusion.o They work with the |
| with your attorney in the buying or selling | | | | various outside professionals and act as the |
| process.o Both parties should understand just | | | | conduit between them.o Finally, a business broker |
| what is being sold--and purchased.o The corporate | | | | intermediary, will in most cases, obtain a selling |
| records should be current and complete.o The | | | | price that is more than the seller would obtain on |
| seller should have available the current insurance | | | | his or her own. |
| policies and the names of the insurance agents | | | | WHY USE A BUSINESS BROKER TO SELL YOUR |
| involved.o If there is more than one owner, there | | | | BUSINESS |
| should be a designated spokesperson representing | | | | Some business owners feel that they can sell |
| the group. This authorization for one of the | | | | their business themselves. After all, who knows |
| owners (or stockholders) to represent the | | | | the business better than they do. Often, these |
| business should be in writing and signed by all of | | | | owners become sellers by simply placing an ad in |
| the owners.o The buyer and the seller must both | | | | the newspaper and waiting for the telephone to |
| have the same understanding of the sale and its | | | | ring. They think of the money they can save by |
| terms. Too often, they each have their own | | | | not paying a broker's fee. Sounds good, but it |
| perception of the deal. Each party to the sale | | | | very seldom works! First, the telephone may not |
| must understand just what the deal is and who is | | | | ring. If it does, it may be the local competition |
| getting what, or the sale may be doomed before | | | | attempting to find out what is for sale and for |
| it starts. | | | | how much. Those who may be interested will visit |
| To help prevent wrecked deals, good | | | | the business, ask a thousand questions, leave, and |
| communication between all of the parties involved | | | | never come back. So much for confidentiality, |
| is a priority. Unless they are told, outside advisors | | | | proper pricing, qualifying the prospects, and finding |
| may not realize how much the buyer and the | | | | the right buyer. |
| seller want to consummate the sale. The attorney | | | | Business brokers are not magicians. They can't sell |
| needs to know from the client that this is a | | | | an overpriced business or create a demand that |
| serious-minded transaction and that, unless | | | | isn't there. What they can do, however, is market |
| something completely unanticipated is discovered, | | | | the business so it is shown only to qualified and |
| his or her job is to pull the deal together. Too | | | | interested buyer prospects. Sellers have to |
| often what happens is that after the offer is | | | | understand that business brokers can provide |
| signed and everyone appears to be in agreement, | | | | suitable prospects from the overwhelming |
| the ball gets dropped. Everybody assumes that | | | | majority of people who don't really know what |
| everybody else is following through and that all is | | | | they want. Very few buyer prospects really |
| fine. The attorney for one side or the other | | | | know what kind of business they want, or what |
| attempts to push on an issue that is, normally, | | | | best fits their needs. In fact, 90 percent of all |
| not particularly important--and suddenly, what was | | | | buyers are considering buying a business for the |
| once a simple transaction now falls apart. | | | | first time, and are open to all suggestions. A |
| Unfortunately, the attorney thinks he or she | | | | business broker can supply many prospective |
| knows what is best for the client and draws | | | | buyers that sellers couldn't find on their own. |
| paperwork or demands something without even | | | | Very few sellers price their business properly. A |
| discussing it with their client. The damage is done, | | | | business broker has a handle on the local |
| the other side gets angry, and another sale "bites | | | | marketplace, access to market data, and pricing |
| the dust." | | | | information not available to a seller. Business |
| The use of a professional business broker can, in | | | | brokers are also good sources of outside |
| many cases, alleviate this problem. The business | | | | financing, if available. In some cases, the full sale |
| broker--having been through the process many | | | | price is not the issue, but rather how the sale is |
| times, usually much more often than any of the | | | | structured is the key to a successful sale. |
| attorneys involved--knows the pitfalls. However, it | | | | Business brokers generally have a backlog of |
| is important that the parties to sale are operating | | | | buyers that they work with on a current basis. |
| on the same wave length and have the same | | | | They prepare a business profile on the businesses |
| understanding of the sale. | | | | they represent, designed to show the business in |
| SELLING YOUR BUSINESS YOURSELF? NOT A | | | | its best light. They know how and when to |
| GOOD IDEA | | | | advertise, when to use trade publications, how to |
| The independent business owner who decides to | | | | use the Internet, and how to qualify buyers. |
| sell is at the threshold of a major process | | | | Business broker can maximize the price of a |
| involving the emotions as well as the marketplace. | | | | business and create added value so that their fee |
| In many cases, the business for sale represents | | | | is generally a non-issue. Sellers usually receive a |
| the seller's life work. Being the independent type | | | | higher price when working with a business broker, |
| to begin with--as well as someone who knows | | | | even after the fee, than they would if selling the |
| about deals and sales--the tempting notion | | | | business on their own. Remember, it almost |
| sometimes arises: Why don't I handle the sale of | | | | always pays to use a professional! |
| my business myself? Those sellers with similar | | | | HOW CAN THE PROFESSIONAL BUSINESS |
| temptations should first take a look at the steps | | | | BROKER HELP? |
| necessary for the successful business sale--and at | | | | Whether buying a business or selling one, going it |
| the advantages of taking those steps in tandem | | | | alone, so to speak, can be full of surprises and |
| with the best possible professional guide. | | | | pitfalls. Here are just a few of the ways that a |
| Preparing the business for sale | | | | business broker professional can assist in the sale |
| What looks good or just fine to the seller could | | | | of a business:o Help maximize the price a seller |
| make quite the opposite impression on | | | | can receive for the business. Many times the |
| prospective buyers. The weathered sign out front | | | | secret is in the structuring of the price and terms. |
| that the seller thinks is "rustic" might strike a | | | | A seller shouldn't leave money on the table.o |
| buyer as in need of a fresh coat of paint. On the | | | | Create and prepare a marketing strategy. The |
| other hand, improvements planned by the seller | | | | business broker professional knows the |
| may be either unnecessary or wrongly-conceived. | | | | marketplace.o Interview, educate and show the |
| In either case, sellers would be wise to rely on | | | | business to only qualified buyers.o Keep the seller |
| the advice of a business broker--a professional | | | | informed of everything that is happening regarding |
| with experience in dealing regularly with buyers | | | | the sale of his or her business, and provide advice |
| and with the objectivity required to set the | | | | accordingly.o Present all offers and point out the |
| business scene to its best advantage. Of course, | | | | weaknesses - and strengths of each one.o |
| preparing a business for sale goes beyond | | | | Provide the names of other qualified advisors, if |
| outward appearances. Ultimately, a business will | | | | necessary and any other resources that will be |
| sell according to the numbers. A business | | | | helpful during the selling process. |
| intermediary can be invaluable in helping the seller | | | | The business broker professional is an |
| provide financial records that are clear and | | | | experienced businessperson who specializes in |
| up-to-date. | | | | selling businesses and helping people interested in |
| Pricing and evaluation. | | | | selling and buying them. They know the current |
| All sellers naturally want to get the best possible | | | | market conditions, pricing strategies and the selling |
| price for their business. However, they also need | | | | process itself. They know how to market the |
| to be realistic about the true value of the | | | | business and work with qualified buyers. Sellers |
| company for sale and to understand that price is, | | | | must understand, however, that the marketplace |
| in fact, dictated by the marketplace. To | | | | and not the business broker will determine the |
| determine the best price, a professional business | | | | final price. |
| broker will use industry-tested valuation | | | | |