Most business owners know everything about their business. They know the good, the bad and the ugly. They understand the ins and the outs. They live with the ups and downs, day in and day out. However, most business owners have never sold a company. Most business owners have never been through the process of selling a business, of thinking through the steps, understanding the details that make a successful sale go right and an unsuccessful sale go wrong.
You don’t know what you don’t know.
If you, like almost all the business owners I’ve encountered, are not a professional business broker, mergers and acquisitions advisor, or transaction attorney, you need help to create and secure a lucrative exit. Not only do you need to know what to do, you need to know what not to do. There are common pitfalls just waiting to trip you up. An exit advisor can help you plan for all of the things that could go wrong. They know the lay of the land and they can help you see what’s ahead.
You can think of selling your business like being on a wagon train in the wilderness. Every expedition needs a trail boss, someone who’s gone over the terrain before. They know how to forge the rivers, traverse hazardous mountain passes, and are prepared to give guidance to inexperienced travelers.
You may know how to drive the wagon better than anybody, but the terrain ahead is a whole other matter. It’s not unusual to wake up one day and think, “I want to sell my company.” It’s not unusual to do no preparation whatsoever and believe that you are ready to make your
dreams come true. Believe me, it happens all the time. You want to find an advisor who is competent, trained, and experienced, because the advisor’s job is to help you prepare for the unknown. A good advisor can help you prepare, alert you to potential missteps, and lead you through a challenging process. There is no substitute for competency, training and experience when it comes to this. The truth is, you can easily be misled if you don’t have someone qualified in each of these areas providing you guidance. There are a lot of people who are in business to help owners sell their companies. Let’s face it, it can be lucrative for an inexperienced advisor to accidentally land a profitable sale.
For you to determine how to find the right person to help you sell your company, you must first be clear on WHY you need that help. I’m going to walk through the reasons with you now, so you can have a better idea of how to approach your steps forward.
Company Sales Are Largely Unregulated
There is very little regulation governing the sale of privately held companies. This means it’s relatively easy for novice business brokers and fledgling merger and acquisitions advisors to hang a shingle and claim that they’re equipped to deal with your unique situation without
understanding the nuances of businesses.
The problem here is twofold. The lack of regulation makes it easy for unqualified advisors to promise more than they can deliver. It also makes it easy for business owners to believe that they can make up the rules as they go. This is a basic error that many owners make.
The lack of regulation does not mean that there are no rules on best practices to selling a company. There are a lot of them.
The problem is that these rules must be learned either the hard way or through extensive knowledge of the industry. The lack of rules, in fact, makes it doubly hard for business owners to sell on their own as well as for inexperienced advisors to extend credible advice.
Going Your Own Way Isn’t Always the Best Way
Business owners, if they wish, CAN sell their businesses themselves.
Would I advise anyone to go this route? No. Does it happen? Yes.
As a business owner, you may have been in a position before where other businesses have called you to ask if you’ve ever thought about selling your company. You may have even thought, “Wow! There’s a lot of demand out there; I can probably sell my business and make a killing whenever I decide the time is right.”
Don’t be fooled. It’s easy to be taken advantage of by buyers who are just out for themselves and not interested in a win-win transaction. For predatory buyers, the only goal is to take everything they can and leave the seller with as little as possible.
Yes, a business owner can, if they want, sell their company on their own. However, it is never advisable to enter a negotiation without having equal or greater knowledge of the process than your buyer. A qualified advisor can ensure that you are armed with as much pertinent planning and information as possible.
We Are Only Good at Certain Things
Truly, the approach to selling a business must be a team approach. The team should include the business owner, of course, to make the major decisions, along with his or her family. It should also include a CPA, financial advisor, transaction attorney, and a business broker or M&A advisor to work through the process toward the best possible result.
You are only good at what you know. It is important to bring people into the process who excel in other areas. Together, your team can be unbeatable, and having a strong team can reassure you that you are, in fact, getting the most out of your company’s sale.
You Are Not Just Responsible for You
When making the decision to sell your business, it’s important to appreciate that, although you may understand your business inside and out, you are likely not in a position to vet other businesses. A qualified business broker or advisor can vet potential buyers who are coming your way to make sure they are on the up and up. Namely, an advisor will be able to ensure that those people who are so interested in buying your company actually have the resources available to do so. An advisor
can also ensure an objective negotiation between the buyer and seller.
More importantly, they can act as an intermediary when things go off the tracks. It’s rare for a buyer and seller to have perfect communication.
When each side has their own interests at heart, it’s common for negotiations to go astray based entirely on misunderstanding and miscommunication. An expert advisor can ensure that the desires of both the buyer and the seller are represented and acknowledged in an appropriate and productive way.
Is it Financially Prudent to Select an Advisor?
As a cautionary tale, I want to tell you the story of an owner who thought he didn’t need outside help in the sale of his company. This man owned a car dealership and had been in the business for years.
He wanted to sell his business so he could open a pizza restaurant. He’d bought a franchise and wanted to sell his car dealership to cover costs.
I talked with the owner about the possibilities that lay before him. Ultimately, he decided he didn’t need help and wanted to represent himself in selling his business and went about listing the company on multiple online business sales sites. This was five years ago.
The fact is, most business owners don’t know what to consider in relation to the sale of their company. They don’t know where to begin, how to think about the value of their company, and how to move forward through the process. In the example above, the car dealership owner knew exactly what he wanted out of the sale of his business, but
he had no idea how to achieve it. His expectations were unrealistic because they weren’t founded on any measurable data.
It’s one thing to have a vision, but another to lay a path toward achieving it.
You want the full value out of your company. To get it, you need to be careful and you need to be wise in choosing a person to represent you and your interests.
Having a competent, trained, and experienced advisor or business broker can make all the difference in the success of your sale. Choosing the right advisor and negotiator for your sale can smooth the road ahead and ensure results. Yes, it will cost you to bring on an advisor; however, when you choose an appropriate advisor, they will more than make up for the cost. A worthy advisor can ensure that you are getting the best value for the sale of your company, often thousands or hundreds-of-thousands over what you may initially think your company is worth.
• You only know what you know. There are many pitfalls in selling a company that can be avoided with the right guidance.
• While you may have buyers interested in your company, it is easy to be taken advantage of when not armed with information.
• A qualified advisor can help on every step of the way, including preparing your business, navigating pitfalls, and negotiating a win-win sale.