Is it best to hire a business broker of M&A advisor or go through the process alone? The natural tendency of most entrepreneurs is that they can do anything. And, why shouldn’t they feel this way – they built and managed a business and how hard can an M&A transaction really be? The reality, however, is that buying or selling a business can be complex, time consuming and inherently risky.
The right business broker firm should provide the experience, track record, objectivity and in-house resources you need to seal the deal successfully. Meanwhile, you can continue to focus on your business and life. Here are six reasons you should use a business broker.
1. Maintain Confidentiality
It is almost impossible for a business owner to maintain confidentiality if they are handling the transaction on their own. Having an intermediary shield your business from being revealed is critical to maintaining confidentiality. Otherwise, word could get out to potential acquirers that you might want to filter out of the process for various reasons, ie; unqualified buyer, a competitor you didn’t want to learn about your impending sale….
“Don’t count your eggs before they’ve hatched,” is the old adage, and it holds true in mergers and acquisitions. Don’t let word of the transaction spread when targeting buyers. Don’t talk about the transaction with people who are not essential to the deal, even after negotiations. Why?
Word spreads, and people assume the worst. Morale drops. Say goodbye to your talent and even long-term clients. A loyal client is used to working with the owner. Guess what happens when the owner packs up their desk. So does the client and vendors with them.
Trust is an essential component to transaction, but it is the same truth in making a deal. Once the deal is secured, employees and clients will also feel more secure.
2. Maximize Price By Making a Market
Many sellers make the mistake of targeting one or two buyers and end up worrying about what to do next when that buyer(s) mysteriously walks away. Targeting a limited buyer pool also places the seller at a disadvantage in negotiations when the buyer tries to bring the price down, even after a business valuation.
Multiple buyers vying to purchase the business increases the likelihood of reaching the reasonable value for the company or higher due to competition.That means targeting more than two buyers with a strategic marketing plan in one sure way to maximize the value of your business.
3. Minimizing Risks Successfully
What risks?More is at stake during the due diligence process and negotiations when selling a business than obtaining the sticker price you desire. A company’s value is measured beyond the face value of a dollar sign, in its mission, brand, products, patents, potential growth, niche and much more. Start with a business valuation to help reduce potential blindspots and risks. Risks oftentimes are imbedded in the ancillary terms of a deal and, unless you are accustomed to seeing these land mines your value can take a significant hit during diligence or after the transaction closes.
An experienced business broker understands where and how buyers imbed these potential risks in their negotiations and will work with you to develop a strategic plan to minimize risks successfully, so you don’t encounter any unnecessary surprises.
4. Maximizing Your Net
While the high level price you are offered for the business certainly matters, what might be even more important is how much of that you will put in your pocket. This issue goes well beyond your tax implications – there are other terms and conditions that can erode your net proceeds.
Not knowing how to maximize your net will either force you to terminate negotiations and suspend your business sale or, worse yet, cause you to feel remorseful after the sale. Both of these situations can be easily avoided by involving an experienced business broker. with the proper team and resources to strategic partners.
5. No Clue What to Do
You have never done this before and have no idea what you’re doing. Everyone begins somewhere. Working with an experienced business broker can give you the confidence to sell your business or the proper strategy when acquiring or merging. In addition, the due diligence process itself can take months and is quite detailed for both the seller and buyer.
Even owners who have sold a company or two still leverage the experience and network of a business broker because of the advantages a third party can bring to securing a successfully deal.
6. No Time
The transaction process incorporates at least five full-time jobs worth of duties easily. That’s why business broker firms exist with specialized teams.
As a high-profile entrepreneur, you need to stay focused on your business and don’t have time to sell it. Your business needs to do better than ever during the sale.
After your business valuation, your company will hustle to do the work it needs to prepare to go on market, such as managing inventory or diversifying profits if the business has under-performed recently. This is not the time for diverted energies.
Going it alone when buying or selling a business makes the process unnecessarily difficult and frustrating for you and potential buyers. Contact the experts at Sun Acquisitions to assemble your team today to ensure you maximize the value of your transaction.