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| Business |
 Selling
Your Business
- Choosing Your Advisors - Part 1By Tricia Radison of Business Transitions Inc. When it comes to selling your business, it’s easy to make common mistakes that cost you money. Even the most straightforward business sale is a complicated transaction requiring specialized knowledge in a number of areas: valuation; business law; corporate tax; marketing and advertising; and negotiation, to name a few. Without good advisors, you could end up with much less cash than anticipated in your pocket when all is said and done. In the first part of this two part series, we will explore the pros and cons of acting for yourself as compared to using a business sale advisor to assist you in selling your business. You will also learn what a Business Sale Advisor can do for you and how to choose one you will be happy with. Selling on Your Own Versus Using a Business Sale Advisor - The first decision to make is whether to sell the business yourself or pay someone to do it for you. Obviously, doing it yourself has the major benefit of saving the cost of a commission, and there’s no arguing that that can be a significant savings. There are situations where selling your business yourself makes sense. For instance, you may already know who is going to purchase the business, negating the need for many of the advisor’s services. Or you may be a hands-off owner with lots of time and a willingness to learn. If confidentiality concerns don’t prevent you from telling your employees about the sale, they can assist you in compiling the necessary information so you still have time for your business. The decision to sell on your own should not be made lightly. The truth is that you could actually end up with less money even though you don’t have to pay commission. In most cases, a qualified advisor will be able to get more for the business than you because they know more about the process, and are able to objectively evaluate your business from a buyer’s perspective. A good advisor has the ability to market your business, create excitement in potential buyers and negotiate the best deal. An additional concern is that selling a business takes a lot of your time and will take you away from running the business -not a good idea when you’re trying to present a well-run operation to prospective buyers. Past financial performance and how well you present the business in your marketing material is important in attracting buyers, but neither will make up for a business that is currently floundering due to the owner’s lack of attention. Who Should You Hire to Sell Your Business? - The Alberta Real Estate Act states that the only people legally allowed to sell businesses are licensed real estate agents and individuals acting on their own behalf. Business sale advisors, sometimes referred to as business brokers or business intermediaries, are real estate agents who specialize in selling businesses. When choosing an advisor, it is important to remember that they are self-educated. All real estate agents in Alberta take the same course to obtain their licenses, regardless of their area of specialization, and this course does not deal with the subject of selling businesses in any depth. While a real estate license is mandatory to sell someone’s business, it does not guarantee any particular knowledge about the selling process. For the best results, select someone who deals solely in business sale transactions. Selling businesses is a far more complex process than selling residential or commercial properties. A residential or commercial real estate agent may have some understanding of the issues involved, but most simply are not qualified enough to justify the fees you will pay. To put it another way, people do well at things they love. You’re better off using an agent who loves selling businesses so much he or she does it full time. In saying that, very small businesses may have trouble obtaining the complete range of selling services of a business advisor. Many business sale advisors don’t work with very small businesses because the workload is comparable to that for a larger business but the owner is unable to pay a comparable fee. Listing with a RealtorŪ may be the only option in these cases. Even if this is the case, consider using an advisor to assist with planning, preparation and valuation. Start with the Yellow Pages, under Business Brokers, and ask friends and associates for recommendations. Then, do your homework. There’s too much at stake to simply sign on with anyone who claims they can sell your business. Speak to several to determine the type of services they provide. Don’t judge an advisor by the size of their buyer database, either. Many will claim to have long lists of buyers, but the chance of one of those buyers being interested in your particular business is minuscule. An advisor who understands how to determine which type of buyer will pay the most for your business, and get their attention is worth a great deal more. Always request a sample “Selling Package” and make sure you’re drawn to the material. This is the stuff that will be used to generate interest in your business. If you’re not attracted to the marketing material, will anyone else be? Your Business Sale Advisor should be able to help you with: - business valuation; - determining whether or not to sell; - planning the sale; - operational/value enhancements; - targeting and qualifying buyers; - a marketing strategy and selling package; and - negotiating a deal. Selling a business takes careful planning and preparation if you want to receive the best possible deal. Don’t rush into a listing agreement. It could result in a year of wasted time or an unsatisfactory sale. Look for Part 2 in the May/June issue! Is it time to sell? Tricia Radison of Business Transitions Inc. can help you decide. Call her today at 403.255.4442 to discover how. |