Why use a Certified Business Intermediary (CBI) to sell your business?
Next year you will turn 65 and after 23 years of operating your own business you are thinking it might be time to retire and travel a little. Time to sell your business and let someone else take on the day to day challenges; let someone else deal with the employees, the competition and of course, the ever changing government regulations. Twenty-three years of running a successful company with over 50 employees has tested every level of your emotional and physical abilities. Selling your own business couldn’t be that difficult…right? ……………. Wrong!
Like most things in life, unless you have gone through the process a couple dozen times you are going to make mistakes. Making mistakes during this process, undoubtedly the most important transaction of your life can be extremely costly and have devastating consequences.
Most Sellers are paranoid about confidentiality, that their employees, venders or customers will find out that their business is for sale. One careless mistake and you risk an exodus of both your clients and employees along with a lot of disturbing questions from your suppliers. Next thing you know, your employees and vendors have contacted your competition and suddenly, you and your business are yesterday’s news.
Selling a business is not like selling a house. Remember, everyone needs a house, no one needs a business. To successfully sell a business you need to start with a plan. A comprehensive sales plan and the first part of this sales plan is to say nothing to your employees, your vendors or your customers. They have no need to know until it is time to close and even then, much thought must be given as to the presentation of the Buyer. Most importantly, continue to operate your business as normal. Employees are extremely curious and will react to any change that appears to be out of the ordinary.
You will need to select a team of professional advisors based on their expertise, not personal relationships. The last thing you want is your brother-in-law or divorce lawyer handling your business transaction. They need to hold your conversations in confidence. Transactional attorneys, experienced CPAs and professional financial advisors all understand the importance of confidentiality and are critical to the selling process.
Next, the business must be prepared for sale. This is covered by three simple rules:
Sell What Buyers Want – Clean up the balance sheet and maximize your taxable income. Minimize personal, non-business related expenses and “perks” wherever possible. Restate financials in order to “normalize” the company’s performance so the Buyer can apply their valuation criteria and make comparisons to other businesses they are considering. On any investment, Buyers are looking for the maximum return and minimum risk. They are constantly evaluating “risk”, which in large part is discerned from the financial history and long term performance of the company, its management team and market position. The cleaner your financials are and the better structured your company is the more attention your business will get.
Make it Easy for Buyers to Buy – A quality business needs to be “packaged” with an understandable and comprehensive write-up discussing the history, present state, future of the business, its products and the industry. It should describe the management team, sales and marketing plan, product descriptions, competition and a complete financial summary with forecasted growth scenario illustrating at least one way the company can be grown. The more information you provide to the Buyer, the more comfortable the Buyer will be with the business. Don’t be afraid to disclose the weaknesses or problems. These are areas where Buyer(s) may feel they can excel and improve the company’s performance. Also emphasize the company’s strengths and what sets them apart from the competition.
Stay in Control of the Selling Situation - If your business is in good shape and you have complete and easy-to-read records, along with a well laid out selling plan, you should be able to stay in control of the selling situation. Be prepared to intervene and take charge as new personalities are added to the transaction. Each attorney, CPA, advisor and spouse all have an opinion that is most likely self served, confrontational and if left unchecked will inadvertently contribute to the eventual demise of the transaction.
The marketing process requires constant contact with prospective Buyers and the exchange of materials, all the while qualifying the prospects financially and professionally. This is a process that completely interrupts your daily activities and generally compromises confidentiality due to the sheer volume of communication flowing through your office.
Once initial site visits have been completed, negotiations and deal structuring start. This is the time in the process when a third party is invaluable. A third party that is preferably sales oriented and commission driven, qualities not normally offered by an attorney or CPA. Once a contract is structured and accepted, the transaction enters the “due-diligence” period. If everything presented in the write-up was researched and verified, the buyer should sail through due-diligence without problems.
Remember, someone needs to control the selling situation, and the period from due-diligence to closing is the most critical. During this time everyone’s emotions and stress levels are at a peak. It takes a special and extremely experienced individual to anticipate the worst and turn it into good before the deal falls apart. If a deal is going to fail, this is the point in the process where it generally happens and this is after many hours and considerable money has been expended by both sides. Furthermore, the excessive activity probably has breached confidentiality and your employees are well aware of what is happening.
Some owners successfully transact the sale of their business without a problem. As successful as they are, they represent the minority. Even with all of the work and research they put into it, they still are not sure if they got top dollar or were structured for the best tax relief. Fortunately, there are individuals that are extensively trained in this specialty and have years of experience in deal making. They are educated and trained through the International Business Brokers Association, the single source for the Certified Business Intermediary (CBI) designation. This designation is not awarded lightly and is only earned by the most dedicated and battle-tested veterans in the industry.
When the time comes to develop your exit strategy, look for an intermediary with the CBI designation behind their name. Working with a Certified Business Intermediary will successfully guide you through the most important transaction of your life.
