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How to Choose the Right Business Broker

Posted on Wed, Mar 25, 2020
 
How to Choose the Right Business Broker
 
Finding the right business broker requires every bit as much forethought and consideration as deciding to sell your business in the first place.
 
Before you make any inquiries, learn how to choose the right business broker.
 

Confirm Their Commitment to Confidentiality

Even sniffing around to get referrals and checking references can compromise confidentiality. It is critically important to keep your intention to sell your business secret. Do some research on your own and narrow down a list of possible brokers for your business and interview them. When you talk to candidates, your first question should be, “What steps do you take to ensure confidentiality?” The broker should have a set of procedures in place that ensures confidentiality and minimizes the chance that word of a potential sale of your business can get out.

Establish Experience

Ask any business broker candidate how many deals they’ve successfully concluded in the past year. Of those, ask how many were in an industry similar to yours, and how many were of a similar size. If yours is a mid-tier kind of business, look for a middle market business broker who understands the issues involved in selling similar-size businesses in your geographic area. Experience counts when considering how to choose the right business broker.

Avoid Upfront Fees

Some brokers charge lots of up-front fees – fees for providing an appraisal, fees for “packaging” your business (creating the prospectus), monthly retainers – fees that they keep whether they sell your business or not! And then, if they do sell your business, they get another fee! Other firms operate strictly on a success fee basis - they get paid only when the sale of your business actually goes to closing. Beware of any business broker who asks for money upfront. If the broker has confidence in his ability to sell your business, he should be happy to earn his commission when the deal is done and get paid when you do - at the closing table.

Trust Your Instincts

You will spend a lot of time with, and share a lot of information with, the broker you choose to help you sell your business. If you don’t feel comfortable with the broker, it’s not likely you’ll get a deal done. Be honest with yourself about whether you think you can create a good working relationship. If you don’t feel the broker listens to your concerns, or doesn’t respond to your inquiries promptly, look elsewhere.

Stay Local

You should meet with your broker, in person, eyeball to eyeball, before you make the decision whether or not to hire them. Is this a firm that you can trust to successfully guide the sale of your business and achieve the results you want? Choose a broker who is nearby and accessible. Although the buyer may come from out of the area, the broker needs to be local so that he can guide the process, attend meetings, assess personalities, anticipate and solve problems, hold hands, negotiate, cajole, etc. – to do whatever is necessary to get the deal done. A broker’s work simply cannot be “phoned in”.

Prime Investments has the experience, the contacts, and the expertise to help sell businesses in Maryland, Washington, DC, Virginia, Pennsylvania, and Delaware, with a nationwide roster of buyers looking for businesses like yours.

Selling a Business: When and How to Tell Employees

Posted on Wed, Mar 11, 2020
Selling a Business: When and How to Tell Employees

It is critically important to keep your plans to sell your business confidential until the sale has closed. The best time to tell your staff is after the transaction is completed. Here’s  when and how to tell your employees you  are selling your business.

Keep Mum Until the Deal is Done

is to not disclose your intention to sell your business to anyone, except your outside lawyer and accountant. If employees get wind of your plans, they may get nervous and begin looking for a new job. Clients and customers who hear about it could lose confidence in you, and lenders may withhold credit. No good can come of announcing your plans.The best course of action 

A business broker helps to maintain confidentiality by keeping communications with potential buyers away from your business. Work with a business broker you trust to maintain absolute confidentiality. For example, if yours is a manufacturing operation, interview several manufacturing business brokers and choose a broker that gives you confidence that he can maintain confidentiality and is familiar with issues specific to your industry.

In rare circumstances, the buyer may require information that 

only your controller, CFO, or other key employee can provide. If you need an employee’s help to complete the sale, tell them only what they need to know, and only when they absolutely need to know it. In some cases, the buyer may insist on meeting with key employees before closing to be comfortable that these employees will stay with the company after the sale. Only allow these meetings to occur at the very end of the process—a day or two before closing and after all other contingencies have been satisfied. And even then, keep these occurrences to an absolute minimum and impress upon the employees involved the need to keep their knowledge of the impending sale confidential from their coworkers.

After the Closing, Call a Meeting

Now that you’ve sold your business and have closed the deal, you need to tell your employees. Call a staff meeting and explain what has happened and why. You will be speaking to the people who made your company successful and attractive to a buyer. Speak from the heart and tell employees how much you appreciate their hard work. Reassure them that you have chosen the buyer carefully, and the sale means the business will continue to grow and thrive. Explain that you will still be around for a period of time to ease the transition.

In order to minimize employee apprehension about what the change in ownership means for them, you should introduce the new owner to the team as soon as possible. When the new owner speaks to the employees, he should mention how you spoke highly about them all and reassure them that everyone’s job is secure and that he is not planning any immediate changes.

Deciding when and how to tell employees you are selling your business is tough, and actually doing it may be even tougher. A seasoned, professional business broker should be engaged who employs proven methods to ensure confidentiality, and who can advise and guide the seller as to the proper timing and context of informing the employees about the sale.

 

Advantages of Using a Business Broker

Posted on Thu, Feb 20, 2020

advantages-of-a-business-broker-4Building a successful business is an impressive accomplishment. Selling a business can be the business owner’s crowning achievement or, if done incorrectly, his biggest disaster. If you’re thinking about selling your business, consider the advantages of using a business broker. An experienced, professional business broker will ensure confidentiality, attract the right buyers, negotiate the best terms, and bring your sale to a successful closing.

Business Brokers Ensure Confidentiality

If word gets out that you’re selling your business, the game could be over before it has begun. Employees will hear about you selling your business and may become distraught or leave. Customers or clients may lose confidence in your products or services and look elsewhere.

A business broker acts as a shield between the business owner and prospective buyers, keeping your identity and your business’ identity confidential while fielding all inquiries and vetting prospective buyers. A broker will ensure that vetted buyers sign strict non-disclosure agreements before they reveal the business’ identity or any further details.

Business Brokers Have Broad Access to Business Buyers

Experienced business brokers know the market for businesses like yours. They can activate a broader network of buyers than a business owner could on his or her own. You may know one potential buyer, but your business broker will know many and will make them compete to buy your business. Your job as a business owner is to keep your operation running successfully, maintaining or even increasing revenues, while your business broker does all the work involved in selling your company.

Valuation and Marketing

Your business’ market value is not just based on a mere statement of taxable income. Business brokers build a case for how buyers will make money for themselves in the future if they buy your business. The broker takes many factors into account. Cash flow (calculated as adjusted EBIDTA—earnings before interest, depreciation, taxes, and amortization) is a primary concern; however, valuation also considers things such as trends in your business sector, location, competition, and proprietary products or trade secrets, among others. It’s the broker’s task to analyze these and other relevant factors, derive the highest obtainable selling price, and then professionally package the business to attract prospective buyers.

Managing the Process

Another reason to use a business broker is that your broker will manage the sales process. Selling a business is much more complicated than selling real estate. There are many steps in the process and many obstacles to overcome along the way. Brokers solve problems as they come up (they always do!), manage all the moving parts, and keep the parties involved (buyer, seller, lawyers, accountants, consultants, and financial institutions) moving forward toward a successful closing.

You’re an expert in running your business; your business broker is an expert in selling your business! If you concentrate on running your business while your broker invests a very substantial amount of time to value, package, market, and sell your business, your sale is sure to be successful!

 

 

How to Prepare Your Business for Sale

Posted on Thu, Feb 20, 2020
How to Prepare Your Business for Sale

You may have a good idea of when you’ll want to sell your business; perhaps you’re nearing retirement, or you just want to try something new. Selling a business takes time—at least six months to a year. If you’re wondering how to prepare your business for sale, here are some concrete steps you can start on right now.

Keep It Confidential

The only person who should know you’re thinking about selling is you. Don’t confide in employees or friends. You’ll have a lot to do to prepare your business for sale, not the least of which is keeping it running and growing to be attractive to prospective buyers. If word gets out that you’re thinking of making an exit, your business could suffer and your plan to sell could fail before it gets off the ground.

Get Your Papers in Order

One of the most important ways to prepare your business for sale is to get your financial records in order. Clean up any abnormalities on your books; make sure you’ve filed all your taxes. You should have three to five years of financial and accounting data prepared and ready, including financial statements and annual reports (if you have them) and tax returns.

Additionally, make sure that all of your licenses, permits, and contracts are current and up to date. These include licenses to do business, industry licenses, special permits, contracts with vendors and customers, leases, operating agreements, etc.

Think About Why You’re Selling

One of the first questions buyers will ask is, “why is the owner selling now?” You should be clear about your reasons for selling your business and be able to talk about them. A buyer needs to be confident you’re moving on because you’re successful—not because you foresee tough times or problems for your business in the near future.

Find an Experienced Business Broker to Value Your Company

Businesses don’t sell in a vacuum; they sell in a competitive market where buyers can choose which companies they want to bid on. A Business Broker has access to information about recent sales in your industry and knowledge about factors you may not have considered, but that are important to buyers in determining how much they are willing to pay. An experienced Business Broker will advise you on how to best position your business in the market.

Using a Business Broker increases the value of your business. By professionally packaging your business for sale—creating a custom-written prospectus highlighting your achievements and presenting your business in its best light—a Business Broker is able to achieve the highest possible price. He also defends that price by explaining to the buyer how the business was valued and by showing the buyer comparable businesses that have sold for similar amounts. If you’re thinking, “maybe it’s time to sell my business” your next thought should be “I should look for a professional, experienced business broker.”

These are some of the things you should think about as you prepare to sell your business. To learn more about the process of selling a business, call us at 240 290-5000 or click here to send us a note.

Of course, there’s no cost or obligation, and we will hold all communications in the strictest confidence.

Signs It's Time to Sell Your Business

Posted on Thu, Feb 06, 2020

Signs Its Time to Sell Your Business

Many business owners consider selling their businesses as retirement age approaches. But choosing the right time to sell can be difficult. Here are some signs it's time to sell your business.

You’re Unmotivated

If managing your business feels like a chore, it may be time to sell. Many business owners find that the passion they had when they started out just isn’t there anymore. The long hours, the stress, the sacrifices made, the challenges overcome, all take their toll over time. You aren’t excited about coming to work anymore—but you force yourself to do it. This is a common experience, called “owner burnout,” and it’s a key sign that it is time to sell your business. If you delay selling and hold on, it is very likely that your lack of enthusiasm will cause the business to start to decline. It’s best to heed the signs and sell your business when you are on top!

The Economy is Strong

Your business may be doing great, but the price you can achieve in a sale depends not only on your business, but on larger economic factors as well. For example, what do interest rates look like? If interest rates are high, the buyer’s payments on acquisition debt will also be high, and that will restrict the value that he can afford to place on your business. If, on the other hand, interest rates are low, debt payments will be low, and the buyer can afford a higher purchase price. Economic forecasts are important as well. If the economy looks like it is going to fall off a cliff, it would be hard to sell your business at any price. If, on the other hand, the economy is expected to grow, buyers will have confidence and are motivated to buy. Clearly, the best time to sell your business is when the economy is strong and interest rates are low.

Your Company is Outgrowing Its Management Structure

It’s great to be successful, but sometimes success brings problems as well as rewards. You are the best in your market at providing the product or service your company provides. You are not only successful, but an expert in your field. People come to you for advice. But while you are an expert in your product or service, you are not an expert in the other skills—finance, HR, compliance, marketing, etc.—that running a business of your size requires. At some point, growth requires that you add levels of management—a first level, second level, third level, etc. Each time you do this, it adds overhead and eats into your profits, at least until the company grows enough to make up the difference. A signal that it’s time to sell your business is when your business is running at full capacity with the people you have. Sell your business while your margins are high and before your need to reinvest in the company!

Retirement Doesn’t Look so Bad

You’ve worked for decades to grow your company and achieve financial security for yourself and your family—you’ve earned your retirement. If you find yourself thinking more about traveling, playing golf, and spending time with your family, that’s a sure sign that it’s time to sell your business. It’s your life! Don’t just daydream—take advantage of what you have achieved before it’s too late to enjoy it!

If you notice any of these signs that it’s time to sell your business, we recommend contacting us at Prime Investments. Here at Prime Investments, we’re dedicated to selling your business to the right buyer at the right time and at the highest possible price. We maintain complete confidentiality in the sales process and, unlike other business brokerage firms, we never charge up-front fees. We get paid when you do—when your sale is complete.

Business Broker Report 16: 3 Tips to Avoid Getting "Burned" by Your Broker.

Posted on Mon, Mar 23, 2015

describe the imageSo, you’ve finally decided to sell your business. Congratulations - it’s a tough decision to make.

But the decision-making isn’t over yet. Now, it’s time to choose your Broker - the firm you need to handle your sale and get you the best possible deal for your business.

But how do you make sure you’re not getting burned by your Broker?

Follow These 3 Tips to Make Sure You Don’t Get Ripped Off:

  1. Don’t Pay Any Up-Front Fees.
    You’ve probably attended seminars where they promise to sell your business for three, four, five or even ten times its true value.
      Back away – don’t get sucked in. This is actually a very sophisticated scam.

    Companies like this put on slick presentations, but are really only interested in collecting big up-front fees, not in actually selling businesses. They claim they can create a “frenzy of buyer interest” that will “skyrocket the price to stratospheric levels.” Don’t be fooled. It’s all smoke and mirrors. They want to get you excited and then stick you with a $30-60K up-front fee.
    Money you don‘t get back when they fail to sell your business!

  2. Use a Brokerage Firm that Doesn't Get Paid Until You Do. 
    Not all business brokerage firms ask for up-front fees.
      Some operate strictly on a success fee basis. These firms get paid only when the sale of your business actually goes to closing. These success-fee based Brokers have the confidence that they can get the deal done. After all, if your sale doesn’t close, they don’t get paid.
     
  3. No Track Record? No Way! 
    You don’t want your Business Broker or M&A Advisor to learn on the job with your sale. Do your due diligence! Check their track record, case studies and success stories, making sure they’re credible. Probe into past and present clients. Are the clients satisfied? Do they even exist?

Don’t learn the hard way -- if it looks too good to be true, it probably is. Stick with a reputable Broker with a solid track record who is willing to earn his success fee only when the sale of your business is completed!

If you’re ready to sell your business - with no up-front fees and no smoke and mirrors - please click here or on the link below or call us at 888 468-1660. We’ll be happy to schedule a free initial consultation and complimentary business appraisal.

There is never an up-front cost or obligation, and all communications will be held in the strictest confidence. 

Sell Your Business The Right Way

Prime Investments Business Brokers takes the risk out of selling. For over 25 years Prime has helped owners in Virginia, Maryland, Florida, Georgia, Pennsylvania, Delaware, Washington, D.C. and New Jersey get the best deal when they sell their businesses – without charging any upfront fees.

Tags: M&A Advisor, sell your business, selling your business, business broker

Business Broker Report 15: Are Market Conditions Right to Sell My Business?

Posted on Mon, Sep 08, 2014

tired business womanYou want to sell your business, but you don't have to sell it today. After all, you've worked hard for many years to build the value of your business. Sure you want to spend more time with family and friends, travel, play golf or do whatever it is you like to do when you're not working. But not at the cost of leaving money on the table. What's the point of working hard for all these years if you can't sell your business for top dollar? You can always stay on a few more years if you have to. As they say, timing is everything.

Is now the right time to sell your business?

We can't answer that question for you from the personal point of view - you and your family have to make that decision. But we can provide some insight into the market for selling businesses. From what we see, current market conditions are extremely favorable to business sellers.

Here are three factors that lead us to conclude that current market conditions have created the perfect time to sell your business:

 

Pent-up Demand
Many business owners who would have liked to have sold over the last few years held off because of the recession. Buyers have had thin pickings. This created a huge backlog of buyers - individuals, equity funds and companies - searching for businesses to buy.

Buyers are competing amongst themselves for the few good businesses available for sale, keeping valuations high. That makes for a real seller's market.

 

Availability of Capital for Acquisition Loans
Buyers - equity funds, companies and individual investors - are flush with cash. And lenders, who need to make loans to stay in business, are actively competing to find good deals to fund.

Additionally the Small Business Administration (SBA) recently increased its ceiling for business purchase loans and streamlined its approval process, making it easier than ever for buyers to be approved.  

Buyers have access to the necessary funds. They're just waiting for the right investment opportunity.

 

Low Interest Rates
Interest rates are still quite low. Low interest rates make it easier for a buyer to afford a strong sales price by lowering monthly debt-service payments. With low interest rates, a buyer can pay a strong price for your business and still stay within the lender's approvable debt-service to revenue ratios. It's a win-win situation. You achieve a high price for your business and the buyer keeps his monthly payments affordable.

But this window of opportunity created by low interest rates won't last forever. As you've probably heard, interest rates are expected to climb as the economic recovery matures. It takes up to a year to sell a business. If you're thinking about selling, you should start the process now.

 

Low interest rates, pent-up buyer demand, and the increased amount of available capital have combined to create an ideal situation for business owners thinking about selling. Is this a good time to sell your business? No . . . it's the perfect time!

 

If you would like to see if the time is right to sell your business, please click here or on the link below or call us at 888 468-1660. We'll be happy to schedule a free intitial consultation and complimentary business appraisal.

There's never an up-front cost or obligation, and all communications will be held in the strictest confidence.

Is This the Right Time to Sell My Business?

 

Prime Investments Business Brokers takes the risk out of selling. For over 25 years, Prime has helped business owners in Florida, Georgia, Virginia, Maryland, Pennsylvania, Delaware, New Jersey and Washington, DC sell their businesses - without charging up-front fees.

 

 

 

 

Tags: business brokers, busines broker, sell your business

Business Broker Report 14: What Do I Do After I Sell My Business?

Posted on Tue, May 27, 2014

man sailing after he sold his businessQuick answer: anything you damn well please!  Sail around the world. Train for a triathlon. Find the perfect trout stream. Play golf every day.

 

Sounds great, but reality is a little more complicated. You can’t just walk out the door the day after you sell your business – and most owners don’t want to. They understand that in order to protect their employees and the legacy of what they have built, they will have to stick around for a bit. That being said, some owners still want to exit as quickly as they can; others would like to continue to work for a few years, although with reduced hours and responsibilities. Some owners might want to retain a piece of the business and cash in on the upside that the buyer creates. The right Business Broker / Advisor can help structure your post-closing arrangements as part of the overall deal and create a situation that works for both you and the buyer.

Although post-closing arrangements are custom-tailored to individual needs, they fall broadly into three categories:

1. Short-Term Transitional Services

Sellers who want to exit quickly should understand that they will need to stay a minimum of 2-3 months after closing to train and familiarize the new owners with all aspects of the business. This includes introducing the buyers to your employees, familiarizing them with your operational procedures and transitioning client relationships. Often in this type of arrangement, your responsibility is full-time for the first month or two, and then reduces to part time. These arrangements typically include a consulting component where you agree to be available for a period of up to one year after closing for occasional telephone, email or in-person consulting. Short-term transitional services are traditionally provided as part of the larger deal, with no additional compensation.

2. Longer-Term Employment

Sellers who would like to stay with their company for more than a few months can have a strong hand in influencing what their post-closing situation will be. Oftentimes we can arrange that the seller limits his duties going forward to the things he likes (sales for example) and avoid the things he dislikes (administration or HR). We can also often arrange for changes in his work schedule to improve his quality of life – shorter work weeks, more vacation time, etc. While these post-closing employment arrangements often have a term of between 6 months and 2 years, we have seen cases where it worked so well that the seller stayed on for 5 years. 

3. Retaining an Equity Position

Buyers can bring more to the table than just the cash needed to consummate a deal. Buyers often bring professional management, additional capital to help the company grow, or other critical elements (such as new distribution channels) needed to take a company to the “next level”. It might be a good business decision in these instances for the seller to retain a minority interest in the company.  The seller would then continue working for a period of time and use the assets the buyer brought to the table to help the buyer grow the business. At some point in the future, the seller elects for the buyer to buy his remaining equity at a pre-determined formula, which, if all goes well, gives him a higher valuation and allows him to participate in the growth that has occurred since he sold his majority interest.

 For more information about issues that relate to selling your business, please visit us at www.primeinvestments.us. There are lots of white papers to download and blog topics of interest to business owners. If you would like to have a confidential discussion about your personal situation, click here or on the link below or call us at 240 290-5000. We’ll be happy to schedule a free initial consultation and complimentary business appraisal.

 There’s never an up-front cost or obligation, and all communications will be held in the strictest confidence.

 Schedule Your No-Fee Initial Consultation

Prime Investments Business Brokers takes the risk out of selling. For over 25 years Prime has been helping business owners in Florida, Georgia, Virginia, Maryland, Pennsylvania, Delaware, New Jersey and Washington, DC sell their businesses – without charging upfront fees.

 

 

 

 

 

 

 

 

 

 

 

 

 

Tags: business brokers, business broker Pennsylvania, business broker Virginia, business broker Delaware, business broker Washington, business broker, business broker Maryland, business broker New Jersey, DC

Business Broker Report 13: Will The New Owner Keep My Employees?

Posted on Tue, Mar 18, 2014
employee getting fired when business broker sold businessYour  employees have stuck with you year after year, working hard to help build your business into a thriving enterprise. You wouldn’t be where you are today without them. So when it comes time to sell your business, it’s not surprising that you are concerned about their future. Will the buyer keep your employees on, or will he just "clean house” and put his own people in.

 

What’s the Buyer Buying Anyway?

Your business may have lots of equipment, vehicles and inventory. Or it may have long-term contracts, intellectual property or other valuable assets. Or it may be a service business with very little in the way of hard assets. In either case, it has one critical component– its employees. Your assets couldn’t generate revenues without them. It’s your employees who have the customer and vendor relationships and the specific knowledge and skills that generate revenues and profits. It’s your employees who make your company valuable.

 As worried as you are that a new owner might let your employees go, the new owner is more worried that your employees might quit! After all, what would happen to the value of your business after the sale if your key people left? Rather than “clearing house”, we find that new owners usually bend over backwards to make sure that the existing employees stay on and feel like they are valuable members of the team. They may offer (or insist on) employment contracts for key people. They will maintain current compensation and benefits. They typically don’t make any major changes for six months to one year after closing. And, oftentimes, they ask that you, the existing owner, stay with the business for a period of time after closing to help smooth the transition.

 So the worry that you may have that your employees will all get fired after the sale is largely unfounded – the new owner needs your employees and wants them to stay. Here’s a brief outline of what to expect with three different types of buyers:

 

1. Entrepreneurial Individual Buyer  

If an individual buys your company, he will likely do his utmost to keep your entire staff intact. He will essentially step into your shoes and, over time, learn the operational details of your business.  He will rely on your employees to keep the operation running smoothly.

2. Equity Fund Buyer

An equity fund buyer may already have an experienced manager to step in and run the company or, as often happens, may promote your second in command to COO and incentivize him or her with the ability to earn an ownership position in the business. In either case, equity fund buyers will typically want all of the existing employees to stay on.

 3. Industry Insider Buyer

If an industry insider buys your company, there may be some positions that the buying company’s existing staff can take over. Sales and production staff are typically safe, as are most lower to mid-level managerial positions; however, some higher-level managerial positions might be eliminated.

 For more information about issues that relate to selling your business, please visit us at www.primeinvestments.us. There are lots of white papers to download and blog topics of interest to business owners. If you would like to have a confidential discussion about your personal situation, click here, click on the link below or call us at 240 290-5000 We’ll be happy to schedule a free initial consultation and complimentary business appraisal.

 There’s never an up-front cost or obligation, and all communications will be held in the strictest confidence.

Schedule Your No-Fee Initial Consultation

Prime Investments Business Brokers takes the risk out of selling. For over 25 years Prime has been helping business owners in Virginia, Maryland, Pennsylvania, Florida, Georgia, Delaware, New Jersey and Washington, DC sell their businesses – without charging upfront fees.

 

 

 

 

 

 

 

 

 

 

 

 

 

Tags: business brokers, business broker Virginia, business broker Delaware, business brokoer Pennsylvania, business broker, business broker Maryland, business broker New Jersey

Business Broker Report 12: Selling Your Business? What Could Go Wrong?

Posted on Thu, Jan 23, 2014
businessman who made a big mistakeYour business likely represents a major portion of your net worth. Before you sell your business, team up with an experienced Business Broker or M&A Advisor. He will help you get the best price for your company and steer you clear of the pitfalls that could cause you to lose the value of your life’s work.

Here are 4 mistakes that are easily avoided when you have professional advice:

Mistake #1 – Accepting a Large “Earn-Out” Instead of Cash at Closing

A company comes to you with an offer to buy your business. They tell you what a great job you’ve done and what a great company you’ve built.  Then they tell you about their company, they wine you and dine you, and maybe even fly you out to their corporate headquarters. You begin to get comfortable with them. They seem like good guys. Then they make an offer with a very strong price, but with one hitch. Most of the purchase price is an “earn out” – paid to you only if your company reaches certain performance goals going forward. This kind of arrangement may be acceptable if you get the bulk of the purchase price, let’s say 70-80%, in cash at closing. But if the numbers are reversed and you get only a small down payment – don’t do it. Even if you continue to run the company for the buyer after closing, you’re not really in control. They call the shots. And if their decisions cause your company not to do well, you’re not going to get paid the full purchase price. It’s that simple.

Mistake #2 – Taking Stock in the Buying Company in Lieu of Cash

Similar to Scenario 1, but instead of accepting an” earn out”, you accept stock in the buying company with just a small cash down payment. This is even more dangerous than the earn-out scenario. In the earn-out scenario, you’ll at least have some control of your company after closing.  When you accept stock instead of cash, however, you are completely at the mercy of the buyer. If his company goes down, your stock goes down. And if the market tanks, as we all know it can, the value of your stock tanks as well. And what makes this scenario even worse is that the stock you received when you sold your business will often be restricted – you’ll be prohibited from selling it for a period of time after closing, typically two years. It’s a recipe for disaster.  

Mistake #3 – Failing to Maintain Confidentiality

You’ve negotiated a deal with the buyer, the purchase contract is almost finished, the buyer has secured financing and the deal is scheduled to go to closing. You decide to hold a company-wide meeting to tell your staff about the impending sale. But then something happens. The deal is called off. Now what?  Now your employees, your competitors, your vendors and your banker all know that you are trying to sell. Your employees get nervous and start looking for another job, your competitors tell your customers that you’re going out of business, your vendors put you on COD and your banker calls in your line of credit. It’s a nightmare scenario which, with the proper advice as to how to maintain confidentiality, could easily have been avoided.

Mistake #4 – Choosing the Wrong Business Broker or M&A Firm

You attend a seminar where a company promises to sell your business for three, four, five or even ten times its true value.  Back away – don’t get sucked in. This is actually a very sophisticated scam.

Companies like this put on slick presentations, but are really only interested in collecting big up-front fees, not in actually selling businesses. They claim they can create a “frenzy of buyer interest” that will “skyrocket the price to stratospheric levels.” Don’t be fooled. It’s all smoke and mirrors. They want to get you excited and then stick you with a $30-50K up-front fee. And then good luck getting your phone calls or emails returned.

Don’t learn the hard way -- if it looks too good to be true, it probably is. Stick with a reputable Broker who is willing to earn his “success fee” only when the sale of your business is completed.

You are an expert in running your business. But you’re not an expert in selling businesses.  Most business owners aren’t – they simply don’t have any experience with the process. Just as providing your product or service requires specific experience and expertise, selling your business requires a specific, but different, set of experience and expertise.

Your business very likely represents your largest personal asset. Selling your business – turning your biggest asset into dollars – is too important to be left to an amateur. You need the services of an expert – a qualified, experienced Business Broker or M&A Advisor.

For other valuable tips about selling your business and to learn more about the business sales process in general, click on the link below, visit us at www.primeinvestments.us or call us at 240 290-5000. We’ll be happy to schedule a free initial consultation and complimentary business appraisal.

There’s never an up-front cost or obligation, and all communications will be held in the strictest confidence.

  Schedule Your No-Fee Initial Consultation

 

 

Tags: M&A Advisor, M&A, selling your business, business broker