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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 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