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Ten Must-Do's When Selling your Business via a Broker.
02 April 2012
1. Hire a trusted, experienced Broker. (Full disclosure: I am one.). A great broker is worth the commission, which, after all, is built into the market pricing. Good brokers know how to market and price a business, know the other agents, and should be able to offer valuable insider information.
Plan to interview three or four candidates. Don’t make decisions based purely on what listing price suggestions they give you. Hire a straight shooter. Ask to see references and the past 12 months of their sales. The market data will tell them and you where the business should be priced. Whoever you hire should be guiding you through the preparation process, including most of the below suggestions.
However, make no mistake. Even though you are the one that has initiated the contact and is looking to hire them, if they think they cannot sell your business, they won’t take it on. Seriously!
2. Insist on a professional marketing campaign, and budget money to pay for it. Look at their marketing materials for other businesses. Are the photos good enough to be in a newspaper or magazine? They should be pretty close to it. How good is the quality of the presentation materials? How well presented is the “story?”.
3. Does the broker actually know how to write decent marketing copy? Do they spend money on going above and beyond the norm? Are their materials clean and professional, or are they cheesy and fluffy? For example, are their head shots more prominent than photos of your Business?
4. Listen to your Broker when they give suggestions on how to ready your Business for the market, including bringing in an Exit Strategist (Full disclosure: I am one.). Try as hard as you can to look at your Business with objective eyes. Check other comparable businesses on the market in the price range. No doubt you will feel your Business is far superior than all of them. But you will be wrong. Try to look at them as a buyer with X amount of dollars to spend. Don’t justify a premium on your Business; instead try to figure out why as a Buyer you might look for reasons not to buy your Business versus the others. Make improvements and updates and/or adjust the price accordingly. Your Broker should certainly be tactful, but they should also be honest. You are hiring the Broker as an impartial set of eyes and a trusted adviser.
5. Once your Business is on the market, though, your Broker should be no longer impartial. Your Broker is there to get you the highest possible price, with the best conditions, in the shortest amount of time possible. Think of your Business now as a new product being launched. Your Broker is the marketing team and the head of sales. Their Broker colleagues are the sales force. Their job is to educate and motivate the sales force. If there is a buzz and if the Business is priced well, they will be in their cars and on the phones calling their clients and telling them about the Business as soon as possible.
6. Motivating Brokers is primarily a function of price. But you must put your best foot forward. Think what is the best bang for the buck and do some “renovation”. Maybe it is about painting. Paint hides age. Paint refreshes. Paint modernizes. Paint cleans. Or for a service Business, what is the equivalent of a paint job?
7. For the love of Pete: Wash the windows! or again, the equivalent
8. Do as much as possible to boost your appeal. At the very least, get all your paperwork in order, “shine” anything that can be shone, have everything ship-shape and to hand that a prospective buyer will probably want to look at.
9. Have an Exit Strategist do an “inspection”. But if you are not prepared to fix everything an Exit Strategist advises, you better be prepared to disclose the newly discovered flaws.
10. Tour your Business with your Broker, who should have already been on hundreds of inspections and should know enough to warn you about what may or may not be a potential problem from a buyers point of view.
If you have been lax in some areas, you should price the Business accordingly or prepare yourself to possibly have to re-negotiate when the Buyer uncovers issues. And your Broker should be able to help you judge how reasonable such requests are. Basically, if another buyer is likely to ask for the same thing, you should be prepared to take care of it or a cash adjustment.
Contact me if you need any help…
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