The Climate for Business Sales in 2022

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The Climate for Business Sales in 2022One way to know how the market is looking in 2022 is to look at the most recent data and recently BizBuySell released their Q1 2022 Report which offers a number of insights worth considering for those looking to close a business transaction this year.

Q4 Beats Pre-Pandemic Levels

Based on BizBuySell’s last report, we already knew that Q4 2019 was eclipsed by Q4 2021, which saw a significant uptick in transactions which was welcome news for everyone. While there were a number of factors for this, not least of it being Q4, which always offers a natural calendar-based urgency, there also seemed to be optimism in an economy that continues to recover amidst uncertainty and inflation. That has carried forward into 2022 with acquisitions now 24% higher than the same period last year and just 3.7% shy of Q1 2019, when most of us had no practical idea of the meaning of “lockdown” or “pandemic.”

Business Owners’ Numbers

Another really fascinating statistic from the BizBuySell’s previous report (Q4 2021) was the fact that despite more than half of the surveyed business owners being negatively impacted by the pandemic, the key financials of business that sold in Q1 2021 were the highest since BizBuySell began collecting data in 2007. The median revenue of these businesses was $688,020 with a median cash flow of $147,752. As other businesses regained health and also went to market, these numbers only changed slightly, finishing at $656,599 and $150,000 in Q4.

Service Businesses Remain Desirable

Some 35% of buyers in the market say they are looking for a service business. This reflects a larger trend over the past five years, in which the number of service businesses changing hands in the market has grown to 45% of all reported business transactions. By comparison that statistic was 37% in Q1 2017.

The New Pandemic(s)

Most business owners surveyed were less worried about diseases and more about the labor shortage and Great Resignation. 64% of surveyed business owners say that they have been impacted by labor shortages, and of those, 59% say the situation is either not improving or getting worse. Peers in our industry weighed in to correlate, with 59% of business brokers saying that labor shortage is the biggest threat to small businesses at the moment.

Not far behind the labor shortage which itself leads to higher overhead, there’s also the challenge of inflation due to monetary policy and supply chain issues. 72% of owners say that their business has been impacted due to inflation, with 76% saying it has not improved or is getting worse. Many business owners have had to weigh keeping prices consistent for customers by eating the margin or raising prices and sharing the pain all around.

These pressures will surely push more business owners into the market to sell, just as the pandemic did two years ago. “Pandemic fatigue” was listed as moderately to extremely motivating for 43% of business owners to consider selling.

The Other Side of the Transaction

Over 5 million entrepreneurs applied for business applications in 2021, which was the largest number ever recorded by the US Census Bureau. At the same time, one in five business buyers self-reported as having come from the Great Resignation and business brokers correlated this trend by saying that 23% of inquiries came from corporate refugees or those proactively seeking business ownership. Part of what is causing pain for business owners — labor shortages — may also be the solution, as some of those “shorting” the labor market may end up buying those labor-troubled businesses.

Final Thoughts

Through these constantly shifting times, the fundamentals of business transactions still hold, whether sellers are finally letting go or buyers are excitedly entering the fray: due diligence, clean books, solid systems. 

We’ve got all sorts of exciting businesses for buyers to look at and are always open to representing sellers who think that 2022 might finally be time to ride off into the sunset. Give us a call.

5 Factors in Creating a Multiple

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5 Factors in Creating a MultipleWhile there are many ways to get a value for your business, we always point towards a professional valuation as not only the most accurate, but the one that qualifies for SBA and bank financing.  In this article we’re going to talk about five factors that professional valuation experts consider when evaluating the proper multiple for your business.

More Than Numbers

While we are never going to argue that an accountant doesn’t know numbers, we will point out that, without years of experience with business transactions, an accountant or CPA can only offer an academic valuation.  It may be accurate, but the advantage of having the knowledge and experience which comes from doing valuations regularly leads to a professional valuation that is tethered to the marketplace, and for those who are actually looking to sell a business, a number that has a relationship to the marketplace really matters.

So, let’s look at what the professionals consider for a valuation multiple that CPAs and accountants who aren’t regularly involved in business deals don’t:

1. Industry Assessment

As we saw during the pandemic, some businesses thrived. Others really struggled.  

Is your industry on an up or down trend?  Is there regulation or legislation that is pending that can really change the model of the industry?

Is the industry susceptible to supply-chain disruptions?  Weather?  Geopolitics?  Prior to 2020 these factors may have been never-never thoughts that we thought didn’t relate to Main Street businesses.  We know better now.

2. Company’s Competitive Position

As with the industry assessment, an assessor will look at whether the company is on an up, down, or stable trajectory within the local, regional, and possibly national markets.  

How is the company competing (price, quality, knowledge, customer service, etc.)?  Are any of those competitive vectors under threat from new entrants?  How?

3. Internal Trends

Just as we saw after 2008, many potential buyers are “giving a pass” to business numbers from 2020.  But that anomaly aside, what was the profitability year-on-year before 2020, and what is it now, when we are many months since shutdowns and business closings?  

4. Ownership Change Risk

With a solid team, a business should stay stable even with an ownership change.  In fact, when done right, many customers don’t even know the business has changed hands for months or sometimes years.

An assessor will look at how involved the owner is with sales and relationship management.  He/she will also look at how much recurring revenue is coming into the business, a factor that de-risks the specter of an ownership change.

5. Desirability in the Marketplace

How desirable is your business in the current climate?  For example, when the Affordable Care Act was going through the legislative process, a lot of health care related businesses didn’t go to market and buyers were adopting “wait and see” attitudes until the ink on the new laws dried.  What are market conditions around your type of business and your industry at this time?

There can be other factors to consider in valuations, depending on the industry and specific business situation, but these five factors are always considered when determining the right multiple for a business value.  Remember that before even looking at these factors the business needs to have clean books and operating manuals.

Do you have an academic value of your business and want a professional one instead?  We can help with that! Give us a call.

4 Reasons It Might Be Time to Sell Your Business

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4 Reasons It Might Be Time to Sell Your BusinessOften business owners come to us long after they should have started to prepare to sell their business.  They realize, all of a sudden, that it’s time to sell.  Just like you want to obtain credit before you need it, you want to prepare to sell your business before you have to.  Below are some ways you know you’ve waited too long (and might want to give us a call for help).

You’ve Plateaued

If you’ve taken the business as far as your capital, competence, and contacts can take you, you’ve plateaued.  There’s nothing wrong with that; in fact, some people love a lifestyle business that they are completely in control of.  

But if that’s not you, and you’re looking for more professional challenges or more income, it might be time to acquire within your industry, or to sell.

You Dread Work

As a business owner, there is absolutely no reason you should dread work.  It doesn’t mean you need to spring out of bed singing every morning, but it does mean that you should be excited, or at least happy, to go to work.

If this isn’t the case, you need to find out if there are other personal reasons why this is the case, or if it’s related to your business.  If it’s the latter, your team will pick up on it, and their morale will decrease accordingly.  More than likely, so are your customers and vendors, and they might already be going elsewhere.

Another way of expressing this that we’ve heard from many business owners ready to sell is, “my heart just isn’t in it anymore.”

The Market Is Changing

Many businesses have to go through various changes not just in consumer preferences, not just in legislation, but in technology, both that’s used inside the office (like Slack) and what is facing the customer (like social media).  

You may sense another change coming in your industry and don’t want to deal with such changes anymore (like the business owner in this case study) or you’ve prepared for the change but think this might be a great time to hand off to someone with a fresh pair of eyes (and legs!) to carry on.

Other times a major shock happens (think of multiple-property vacation rental owners during worldwide lockdowns/closures) and people reassess and realize they don’t want to go through that again.  Those struggles drove many sales in 2021.

You Want to Make a Change

Some people want to make a change to their personal lives, but can’t do so because of their businesses.  While the attitude to remote work has entirely shifted in the last two years, perhaps your business won’t allow for it, or perhaps remote work isn’t what you need, but a break.

That break could be just for your own reasons, or it could be to spend more time with family, or to do something you promised yourself you would do years ago, and then seemed to forget that promise.  When that’s the case, the business is no longer an enabler of your goals and dreams, but an obstacle.  One of the final ways you can thank your business (and follow your dreams) is to change that obstacle into an enabling asset and pass it on to someone else.

If you’ve realized in reading this that it is time to sell, we’ve got a few first items that you should consider, which we are going to ask you about the first time we talk. 

Understanding the Great Resignation

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Understanding the Great ResignationJuly 2021 saw 4M workers leave the workforce, with that number increasing in August and September.  The largest age group among these workers were in the 30-45 age group.  While these numbers are not insignificant, they still only represent 3% of the workforce, not 30%.  But as we noted before in our discussion about the $15 minimum wage, business owners are at their best when they anticipate trends, instead of waiting for those trends to happen to them.

Causes

While the term “great resignation” is just as recent as the resignations themselves, a few theories have been floated as root causes of these employees leaving their jobs:

  • “Pent-up” quitting: those who didn’t immediately resign in the face of uncertainty in 2020 have decided to finally do so now
  • Existential revelations: when people were laid off or had some time to work remotely, they took a hard look at their present circumstances and didn’t like them
  • High stress: resignations have been higher in health care, tech, food service, and retail, all sectors that either had a sharp increase or a sharp decrease in revenues and customers

Given that the event is still happening amidst a lot of other global uncertainty, it’s not clear that any of these possible causes is driving resignations more than another.  There may be a hidden factor that will become more clear in time.  But that shouldn’t stop buyers or sellers from moving forward with transactions.

Address the Situation

Whether you’re a buyer or a seller, you can lean into the so-called “Great Resignation” as part of your due diligence or preparation to sell your business, respectively.

Buyers

We’ve already mentioned earlier this year that Covid-19 is causing buyers to look at staffing issues more closely.  Buyers are often not going to be able to interview current employees directly, but they can ask the seller for employment information: how long employees have been there, what the historic turnover rate has been, and if that’s been any different since March 2020.  If there is a significant difference, ask the seller for reasons why.  

Sellers

With the additional buyer scrutiny directed at personnel, it’s entirely justifiable to lean into retention as you prep your business for sale.  If you have had more resignations than usual since March 2020, try to look at aspects of employment that may have broken under the stress:

  • Company culture: is it healthy and thriving and did it weather the challenges that lockdowns and layoffs may have caused?  If not, what are you doing to address this?
  • Pay and working conditions: are your workers in-person or working remotely?  How is your pay in relation to the rest of the marketplace and its adjustments since March 2020?  If your staff is unhappy with pay and working conditions, what do you intend to do?
  • Vendors and supply chains: bad business conditions tend to roll downhill.  Did you have to absorb any of the challenges of your vendors?  Did your supply chain break down?  How did this affect your team?  Are there measures you can take to mitigate future shocks?  Have you implemented those measures?

Business owners often look at what is going on around them and try to think about how conditions might affect their businesses.  But those who are looking to sell need to be particularly sensitive and proactive.  It’s not enough to know about the Great Resignation, you need to make sure you take whatever measures you can to make sure you don’t become part of its statistics, as that will directly affect your ability to sell the business at the price you want.

Has your business been affected by the Great Resignation?  We’d love to talk to you about how to turn things around.  Give us a call.

IBBA and M&A Source Market Q2 2021

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IBBA and M&A Source MarketThe IBBA and M&A Source Market Pulse Survey was created in 2012 to provide business owners and their advisors with analysis of changing market conditions.  Here at Apex we use these surveys to get a sense of what’s going on in the Main Street (businesses between $200k-$2M) and the lower middle ($2M-$50M) markets.  Q2 of 2021 gave us a chance to look at the strange year of 2020 and what has changed in 2021.  Given that the findings from the survey come out to over 100 pages, we’re going to save you from reading it and share just a few observations of our own.

Covid-19 Changed Conditions for Buyers and Sellers

While it may seem obvious that “Covid changed things” in the business transaction market, most outsiders would not necessarily be able to tell you precisely how.  

Buyers

Many talented individuals got laid off in March 2020.  While some of them were hired back, many of them weren’t, and this led to an openness to a shift in career, including buying a business.  The overall lack of certainty not just globally but internationally, and not just in how we live and work but even how we vacation and make future plans has led some to see business ownership as a way to control their own destinies.  We’ve certainly seen quite a few of those individuals come through our doors in the last 18 months.

Sellers

Sellers had to work through their own situations starting in March 2020.  Layoffs may have been part of the solution, but they also had to deal with local legislation and had to embrace remote work, even if they had previously never considered the option.  If they made it through 2020, even with the assistance of EIDL and PPP, they now had a story to tell: my business survived through a pandemic.  That made some businesses more valuable than they were prior to the pandemic, and the owners of some of those businesses, now that they’ve had a moment to stop bailing water, are keen to cash out.  The adjusted EBITDA on such businesses in the lower middle market have been enjoying a .5 multiple increase in valuation.

For those sellers who didn’t have a “pandemic-proof” business, they still had opportunities to sell to buyers who were open to turnaround options.

Areas of Focus

The survey also confirmed trends we’ve been seeing.  For example, in due diligence in the lower middle market, the focus has been on staffing.  With the major changes happening in employment trends due to the pandemic upheaval, buyers in the lower middle market have been focusing on key players and putting employment agreements in place for their transactions.  Main Street businesses are also looking at staffing issues and getting clear who has been in place and for how long, and what the turnover rate has been historically and during Covid-19.

Some things never change.  We still see a closing time of 3-4 months from LOI to dotted line, but 50% of those deals fall through for one reason or another.  One of the consistent reasons a deal may ultimately fall through is a total lack of mental and actual exit planning on the part of owners.  95% of owners do not have exit plans in place and get dismayed when we tell them about tax consequences or what they will need to do accounting-wise to be sale-worthy.  

If you’re serious about selling a business, whether this year, next year, or sometime in the future, the one single action you can take today to make sure you get more money at closing, a better multiple, and fast, smooth sale is exit planning.  Then when you’re ready to sell we can just start executing on that plan.

Need help getting started on that exit planning?  We know just where to start.  Give us a call.

Selling to Private Equity: Do Your Due Diligence

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Private Equity FirmsDespite many of the challenges of the pandemic, there’s still a lot of investor money looking for solid and smart investments.  Some of that money is sitting in the pockets of private equity firms, and those firms are increasingly looking at smaller deals to fill out their portfolio of investments.  Private equity (PE) firms present an interesting opportunity to sellers and those preparing their businesses for sale should take a bit of time to understand what PEs are and how to prepare for offers they may make.

What Private Equity Can Offer

While PE has the reputation for buying underperforming companies and then re-engineering their financial, managerial, and operational structures before ruthlessly flipping them, that’s not usually the attitude they bring to smaller, Main Street businesses.

If a Main Street business offers solid growth potential and has a strong team in place, PE can accelerate that success:

  • They have access to capital as needed
  • They can utilize economies of scale (leveraging certain services they may offer to every company in their portfolio)
  • Creating strategic partnerships (this can be with other companies in the portfolio or through their own connections)

Do Your Diligence

Don’t let the term “private equity” intimidate you.  They are just people trying to find a better-than-average return on their investments.  They will definitely do their homework on your business.  But you should be doing the same to them, particularly if you are going to stay on in the business after the transaction or care what happens to your employees if you are slated to leave.

Questions to Ask

The first question you might ask is “What’s your strategy for our industry?”  Follow this up with “Why are you attracted to the industry?” and “Where do you see our business going?”  These are short questions but they should lead to long conversations, particularly if the PE has a strategy and isn’t just looking to spend their dry powder.

You can also also ask the expected questions, like:

  • Can you introduce us to new markets?  New suppliers? 
  • Can you help us develop new products/services?
  • Are there any related companies in your portfolio that we might have synergies with?

Don’t be blinded by the references they might make to how much money they have under management.  What do they bring to the table for your business and your industry?

People to Talk To

You are going to want to call their references.  For PE this would be current and former companies under management.  If they are willing to let you talk to them, you should also talk to those whose deals didn’t get to the finish line or owners who exited sooner than planned.  Also speak to members of corporate boards which the PE has ties to.  

A PE, just like your business, isn’t just a balance sheet and a profit and loss statement.  They have a culture, a way of doing things.  That way of doing things should align with your company’s culture as well.  A PE may want to buy your company outright, or they may offer you a chance to leave some skin in the game to take the company to the next level and have a second exit.  Or they may just want to make a small investment now and see how things go.  Be open to different structures and possibilities.  

Private equity groups and family offices are just one of the many qualified buyers that our brokers keep in touch with on a regular basis.  We introduce qualified buyers to our new listings each week.  If you’d like to be one of those listings, give us a call so we can see if we’re a good fit for each other.

Building “Potential” Into a Selling Price

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Building Potential into the Selling PriceInevitably, in discussions with sellers, we hear the phrase, “If the buyer does X,” in which X increases the value of the business. In fact, we’ve shared before the major benefits of one small tweak which buyers made to significantly increase profitability. But that’s the point, that’s a benefit that accrues to the buyer, because he/she did the work. So, when can “potential” additional revenue be factored into a selling price, to the benefit of the seller?

Possibility in the Future

Let’s say your business is B2C and is in a heavily-trafficked shopping center. But, there is a development going up across the street. It’s an apartment complex with 250 units. For purposes of this example, we will assume that the permitting process has completed and approval has been issued, but construction has not yet started.

It is, of course, certain that your business will profit from the increased presence of the inhabitants of the new apartment complex. But how can you factor that into your selling price?  

Firstly, you’ll need to zero in on construction start/finish dates. You can’t just accept those dates at face value: you’ll need to look at the history of the municipality in regard to major projects as well as the contractor(s).  How often are projects completed on time? If they are not completed on time, how far off are the estimates?

Secondly, you’ll need to investigate the actual numbers behind the new traffic. As part of the permitting process municipalities have to issue future traffic estimates. Obviously, those numbers are going to be phased in over time as not all the apartments will fill up the day the complex opens. Don’t only ask the municipality for their data. If your business has a professional association, that association will often have studies done that can tell you precisely the economic impact of a new development in proximity to your location.

Thirdly, you’ll need to deal with the real estate in relation to your business.  If you own the real estate and have it as a separate transaction (best practice), then not only will the value of the business go up, but so will the value of the property. If you don’t own the real estate, you’ll need to get written commitments from the lessor as to what the new rents will be, as the buyer will certainly argue that any potential profits due to the new development could be eaten up by major rent increases, also due to the new development.

With all this information, you’ll be in a much stronger position to build “potential” into your selling price and make a case to a buyer for an increase in the price of your business over what the current financials demonstrate.

Certainty in the Near Future

But that scenario is entirely different from one in which the seller has done something that has not yet shown up in the financials, and may not for some time. Let’s say you’ve signed a contract with a client for which work will begin in a year or two, or with a type of vendor that tends to have long and laborious payment cycles (like the government). How can you build this soon-to-be actual income into a selling price?

We’ve seen this go a number of ways. It’s rare that a buyer and seller will agree on some simple formula immediately. Often we see that a buyer might agree to a percentage of that revenue significantly less than what the seller hoped for. Or, we might see the seller so certain of the strength of this new revenue stream that he/she will ask for a percentage of that new income to be baked into the deal.

Unlike the apartment scenario, in which a shovel has yet to hit dirt, in this scenario, the seller has done all the digging and building and is just waiting for the payback. Rather than an estimate based on an estimate, a seller is now talking about percentages based on a certainty. Hence that “potential” will seem much more immediate to both the buyer and seller.  

Are you facing some developments that you think will spell great potential for your business and want to discuss how it might affect your selling price? We’d love to chat with you about it!

7 Ways for Sellers to Avoid Wrecking a Deal

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Avoid Wrecking a DealThere’s obviously a lot more than seven ways to wreck anything in life, not just business transactions. But over the years, we have seen some particular situations come up over and over again that need to be highlighted.  We’ve divided them into things to keep in mind before the transaction begins and during the transaction.

Before the Transaction

1. Price appropriately  

One way to pre-wreck a deal is to price inappropriately so that you don’t get any lookers, much less any offers.  Remember that you’re rarely objective about anything you’re personally invested in, and as a business owner, you also probably don’t have the skillset or experience to know what your business is worth in a particular marketplace.  Even if you’ve done some valuation calculations yourself, for best results, get a certified valuation.  It makes the deal bankable and much more likely to go the distance.

2. Keep confidentiality

Loose lips sink ships.  There’s a reason that saying has come down to our present day.  Confidentiality means your employees don’t get scared off and your vendors don’t let something slip to the competition.  It’s an exciting and momentous period in your life, no doubt, but you can talk about it to your heart’s content when the deal is done and the check has cleared the bank.

3. Be prepared

One of the more tiring but perhaps most necessary aspects of a business sale is the due diligence. We’ve talked about how important it is to have your company financials in order and your taxes up to date (and we’ve also shared stories of what happens when you don’t). You should have up to date paperwork because it will help you run your business better anyway, so get in the habit and you won’t have to do much more when it comes time for a sale.

4. Encourage competition

While ultimately you can only ever sell your business to one buyer, that’s no reason to only have one buyer competing to buy your business.  Some of the best outcomes for everyone occur when there are multiple buyers battling for a business.  As the seller you then get to evaluate the qualities of the buyers for fit with your business and the amount of their offer.  

During the Transaction

5. Stay flexible

You should have your deal breakers clear in your mind throughout the process, but remember to think expansively and creatively about solutions when the buyer is making a demand.  It doesn’t always have to be a binary “this for that” swap.  Sometimes you can ask for something in the future or work out something with the real estate, or ask for a royalty.  That doesn’t mean settling for a bad deal – it just means thinking positively rather than negatively about deal points.

6. Don’t lose momentum

It’s very simple: with delays, deals often die.  Part of our jobs as brokers is to keep the ball rolling, making sure questions are answered, concerns are addressed, and technicalities are noted.  Just as before the transaction begins you need to have your paperwork in order, when you’re in the transaction you need to keep the paperwork going.  It can feel infinite at times, but we promise it’s not: see the light at the end of the tunnel.

7. Stay focused on your business

One of the advantages of having a broker is the chance for you to stay focused on your business instead of pouring all your time and resources into making a transaction happen.  Remember that a buyer wants to see the business as a going concern from start to finish with you, and if your business deviates from the norm during the transaction that can often cause you to take a haircut on the closing price.  You’re the owner until you’re not, so act appropriately.

The most successful sellers keep all seven of these ways in mind from the start to the conclusion of a transaction, but if you even have four of them clear in your mind when we get started, you’re well on your way to success.  

Concerned about one of these in particular?  Give us a call and let us know how we can help.

Why Are You Selling Your Business?

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Why are you selling your business?We’ve often talked about the paperwork that you need to put in order for a business sale.  But something often underestimated is the storytelling behind selling a business.  Just as there was a narrative for how you started the business, there’s a story for why you’re selling, and that’s something you need to take some time to capture.

The Easy Questions

The questions you should tackle first all lie in the past:

  • Why did you start the business in the first place?  If you didn’t start it, why did you buy it?
  • What challenges have you overcome along the way?
  • What goals have you achieved?

The Big Question

In between the past and the future is the present, and that most present-tense of questions in this process is always the first one a buyer asks us when we share a business, namely, Why are you selling the business?  Now, there are hundreds of “correct” answers to this question, but only a couple very wrong ones, for example:

  • I think revenue has topped out (this means there’s no chance for growth which puts a damper on the profit needs of the buyer)
  • I’m working too much (this could imply you don’t have processes or key team members in place)

The Hard Questions

The previous questions you knew the answers to intuitively and could answer them just as quickly as they were asked.  These next questions are also in your past, but they are in the buyer’s future.  They also are unlikely to be easily answerable on the spot.  They include:

  • What have you not done, and why?  While it might be unpleasant to revisit failures or missed opportunities, remember that buyers are  coming in with fresh eyes and energy, and with your experience to guide them, they might be able to revisit some of those opportunities and convert them into successes.  We’ve seen it plenty of times.
  • If you were continuing in the business, what would you do first?  What would be your focus?  This gives buyers a road map.  They may have their own (sometimes not good) ideas, but most times they will really value your advice.
  • Why would you be interested in this business if you were a buyer?  This is a chance to speak about the industry and its growth, the fact that it’s a lifestyle business, or how much you enjoy working with the employees.

If you want to explore these hard questions in more depth, we’ve talked about some of them before in an exit interview for sellers.

Remember that your answers to these questions don’t need to be lengthy and detailed, but no potential buyer is going to complain if you do decide to share a lot.  Even better, if you are willing to be vulnerable and share some of your own personal challenges along the way it can put a human face on the business and allow buyers to understand your journey better (and consider how good of a fit it might be for them).  Writing these answers down allows buyers to get to know you even better before a first meeting.  As such, you might even save a few anecdotes or points to share in person to underline some key ideas.

But most importantly, taking the time to answer these questions will help you stay calm and focused on the WHY of selling your business, which will be important on those days when you might be frustrated about due diligence or feel like the buyer’s questions never end.  Selling a business is emotional, though the level of emotion varies for each individual.  A helpful counterweight to that emotion are the cold hard facts of your entrepreneurial journey.

Do you feel like you’ve got a compelling WHY for selling your business?  We’d love to hear about it.  Give us a call!

How to Find a Business Broker

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How to find a business broker.Whether last year caused changes in your life, or you’ve resolved to take an entirely different direction this year (or both), buying or selling a business is one of the most important decisions anyone can make.  The successful outcome of these possible transactions will be due in large part to your choice of business broker.  In this article we will talk about how to find a business broker in 2021 (and beyond) to help you make the best choice for your future.

Must Haves

We’ve already said that buying or selling a business will be one of the most important decisions (financial and otherwise) of your life.  That means that hiring the right broker will either be the very first decision a buyer makes or the very last decision a seller makes.  We think there are three indispensable qualities all business brokers should have:

  1. Knowledge.  There’s so much knowledge that goes into being a broker.  Brokers understand the sale process and the worth of valuations, as well as how to properly market and price your business.  They have solid broker agreements that are simple to understand.  They may also have certifications that attest to what they know.  They understand the importance of confidentiality throughout the process and will explore tax and legal questions with you.
  2. Experience.  There is simply no substitute for experience.  Don’t be afraid to ask brokers how many years they have been in the industry and/or how many deals they have been part of.  Now, everyone has to start somewhere in their broker journey, so be willing to consider someone who has a lot of experience in your industry even though they may not have been brokers for decades and decades.
  3. Industry Knowledge.  While brokers work with an impressive variety of businesses, over time particular industries or business sizes become sweet spots for them.  Don’t be afraid to hold out for a broker, or broker team, who have the proven experience.  That experience will often lead to better outcomes for you.

Very Important

These next two qualities aren’t “deal breakers” but we consider them very important:

  • Connections.  There are going to be other people who are going to make this journey with you, bankers, accountants, attorneys, etc.  A broker with a lot of connections can help you find a missing resource of your transaction that you might not otherwise have obtained on your own.  Not everyone networks in the same way, but networking is indispensable for brokers, and also tells you a bit about how they conduct themselves.
  • Likeability/Compatibility with you.  You’re not going to marry your broker, but you should consider the realities of a 3-18 month relationship: you are going to be working together on a serious and intense project, involving highly personal issues, from the start of your transaction to the end.  If your initial meetings aren’t going well, that might be a sign to keep interviewing.  Do not discount the importance of getting along well with your broker: that relationship will keep you going through the challenges that will surely be ahead (as they are) on your business buying/selling journey.

Where to Look

The best place to start, obviously, is with the people you know.  Check with your CPA, attorney, business coach, etc. to see if they know anyone worth checking out.  Next, discreetly put out feelers in your social circle.  If nothing comes up within these inner circles, consider looking up some of the business brokerage/M&A firms in your local area.  Check for testimonials and reviews but also take note of some of the names of the principals and brokers and head over to LinkedIn.  Type in their names and see if you already have a personal connection (LinkedIn will show you if you do).

All throughout the process, remember that knowing where you want this journey to begin (or end) is an important landmark to help you find the right person.  Share those thoughts in any interview with a potential broker: the answers will be a helpful guide to the conversation.

Obviously we’ve got a team of talented people here for every type of business and personality.  Take a look at our team or give us a call today: we’d love to chat with you!