March Madness, commonly known as the NCAA Basketball Tournament, was played in sites across the United States this past weekend. This has been a special time of year for me since I was young, as basketball was the “first love” of my life. I was even lucky enough to be able to pursue my childhood dream of coaching college basketball for four years after graduating from the University of Texas. The NCAA Basketball Tournament officially starts on Selection Sunday (March 11 this year). It is on that day that teams that did not receive an automatic bid to the basketball tournament learn if they were selected to participate in the competition. Each team selected for an “at large” spot in the tournament presented to the selection committee a case for their selection based on a sophisticated criterion including elements ranging from strength of schedule to wins against quality opponents.
A second selection process traditionally occurs annually in March & April in the United States. This selection process involves business owners picking business brokers to represent them in the sale of their businesses. The reason this selection commonly occurs in the spring is because the best time to sell a business is when a freshly filed tax return exists for potential buyers, their accountants, and banks funding acquisitions to review. The most common dates to file federal business tax returns are March 15, April 15, and September 15.
Motivated to sell their businesses for the best possible market price in a timely manner, entrepreneurs often start their interview process related to business broker selection once their tax return has been filed.
The following are five recommended criteria an entrepreneur explore when interviewing a business broker to sell their business:
Experience – There is NO substitution for experience in the sophisticated process associated with selling a business. Experience should be vetted on both an individual broker and firm basis.
- Individual Business Broker Experience – No intelligent business owner would select an attorney fresh out of college to address legal issues for the company. Similarly, it is recommended that a business broker with a track record of transactional success built over multiple years be selected to represent a business owner in the sale of their business if a sale at the maximum possible market value facilitated with “best practices” is desired.
- Business Brokerage Firm Experience – Duke, Michigan State, North Carolina, and Kansas traditionally advance deep into the NCAA basketball tournament. They do this because the teams have experienced players and coaching staffs. Business brokerage firm experience also plays a key role in transactional success. It is not happenstance that some business brokerage firms have been active in a marketplace for decades and have 100’s or 1000’s of successful transactions under their belt while others are the “newest” franchise rollout in an industry where “people” and not process are the critical ingredient behind success. The contribution made by an established business brokerage firm to individual projects can range from direct senior business broker knowledge & guidance directly or indirectly with a business sale to a database of knowledge about transactions in a specific industry available to all business brokers with a firm.
Knowledge – The sale of a privately held company or family owned business is a sophisticated process requiring deep & diverse knowledge related to business, tax, legal, and real estate issues. One of the reasons to engage a business broker is to have a knowledgeable guide through the process. One of the benefits of employing a business broker who has successfully facilitated numerous transactions is the ability to learn from them what has been employed in prior transactions to effectively complete a transaction at the maximum possible market price while mitigating post transaction legal & tax liability.
Sales & Negotiating Ability – A business broker is a “Big Ticket” salesperson selling a sophisticated product through a long sale process. To successfully sell a business, a business broker needs to find a buyer, persuade the business buyer to purchase the business at a value both the buyer and seller find satisfactory, and successfully close the deal. Many college basketball players are willing to shoot a 3-point shot in the first half, a smaller group are willing to take the shot in the last minute of the game, and an even smaller group will put the shot in the bottom of the net. An entrepreneur selling their business wants the business broker with the skill & confidence to “take and bury” the shot when emotions are running high on both sides of the transaction. Nothing speaks louder about sales & negotiating ability of a business broker than their historical record of completed transactions. The simple question of “Can you tell me about the last three transactions you have completed?” by a business owner of a business broker being interviewed will quickly determine whether that party has the ability, knowledge, and experience to successfully facilitate the desired sale.
Customer Service – The sale of a privately held company or family owned business is a “BIG” event in the life of an entrepreneur. Timely returned telephone calls & emails, the ability to meet in person confidentially with potential buyers and/or the broker at the business broker’s office, and patience & understanding related to the stressful nature of the transaction are business broker attributes that should not be overlooked when selecting representation. Simply stated, the business broker selected should be someone you are comfortable communicating with about issues big & small and they should possess the ability to facilitate confidential meetings in a private setting with knowledge, experience, and professionalism.
Professional Network – Most “middle market” business sales involve a bank financing the acquisition. The ability to find funds to complete an acquisition can be an important business broker role once a willing buyer & seller are identified. Underwriting & credit approval polices vary greatly between banks. Selection of a business broker with a deep & diverse set of connections in the banking community can be an important ingredient in achieving a timely sale of a business at the best possible market value. Business brokers can also be a great source for attorney, accountant, and wealth adviser referrals. All three of these types of professionals are common participants in transactions involving the sale of a privately held company or family business.
One final consideration in selecting a business broker for professional representation in the sale of a privately held company or family business should be how they talk about the peer competition being interviewed. As a young basketball coach, I was taught by legendary college basketball coaches Denny Crum, Roy Williams, Jud Heathcoate, and Dale Brown that when recruiting you should tell potential players why they should play for your school and how you will develop them as a player and academically. You should NEVER talk negatively about other schools or coaches as a method of differentiating yourself. I believe this is true whether you are selling a college basketball scholarship, business brokerage services, or a new roof. Recently, I passed on engaging a referred roofing company to put a new roof on my home because their salesman talked negatively about other recommended companies during a sales presentation. A quality company should always sell their product or services and not seek to secure customers by denigrating peer competition.
My firm IBA, is the oldest business brokerage firm in the Pacific Northwest. We would welcome the opportunity to be part of your interview process if you are selecting a business brokerage firm to sell your business in the spring of 2018.
IBA, the Pacific Northwest’s premier business brokerage firm since 1975, is available as an information resource to the media, business brokerage, and mergers & acquisitions community on subjects relevant to the purchase & sale of privately held companies and family owned businesses. IBA is recognized as one of the best business brokerage firms in the nation based on its long track record of successfully negotiating “win-win” business sale transactions in environments of full disclosure employing “best practices”.