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  • The Value of Local Representation in the Sale of a Business

    May 15, 2018

    In 1919 Barnum & Bailey’s Greatest Show on Earth merged with Ringling Brothers World’s Greatest Shows creating one of the greatest circus shows in the history of the world.  In the 1920’s, the circus would be welcomed into town by a legion of paying customers who would create memories and have experiences that would last the rest of their lives.   A wonderful example of a purchase that provided value beyond its cost.   In the same era, another phrase was born “Dog & Pony Show”.  In its literal context, a “Dog & Pony Show” was a show that advertised to be a great circus, but turned out to be little more than a show featuring common animals and third-rate experiences.

    In the world of business brokerage there are also “Dog & Pony Shows” that sound great in marketing materials, but often fail to deliver on their promises.   These “Dog & Pony Shows” generally take the form of slick, well-advertised, seminar style presentations featuring persuasive salespeople from a firm from outside of the local marketplace attempting to convince entrepreneurs that they have the ability to sell their businesses at premium values.  The underlying goal of these presentations is to collect four or five figure fees for business valuations and to get the process started. Special pricing is generally available if payment is made “TODAY”.  Unfortunately, more often than not what an entrepreneur receives for their payment is an inflated, boilerplate, business valuation (Guaranteeing a happy, paying customer shortly after the transaction is completed) and a limited or non-existent marketing & sales effort to deliver a customer interested in actually buying the business at the advertised price.  In 2018, these “Dog & Pony Shows” can also take the form of virtual business brokerage firms making their sales pitch via webinar.

    As the saying goes, “If something sounds too good to be true, it generally is”.  The following are six reasons why an entrepreneur interested in selling their business should consider engaging local representation:

     

    1. The sale of a privately held company or family business is an unfamiliar, sophisticated, nuanced process involving a significant personal asset. Most entrepreneurs have numerous questions during the sale process.  Local representation provides the option of asking questions and having detailed discussions in person, in addition to communicating by telephone, email, and text.  If you are an entrepreneur that prefers discussing sophisticated information in person, the ability to meet with your business broker face to face should be taken into consideration in selecting representation.

     

    1. Local knowledge can be important in selling & negotiating the sale of a business. Local knowledge can range from market dynamics that impact the value of the business to potential strategic acquisition candidates for the company to the impact of local taxes on deal structure.  For example, the valuation of furniture, fixtures, and equipment for tax allocation purposes can vary significantly in the Pacific Northwest based on whether the transaction is completed in the high use tax state of Washington or the state of Oregon with no sales tax.

     

    1. A privately held company or family business is a complex product to sell with numerous unique characteristics and intangible assets. The best way to sell a sophisticated product is in person.   A local business broker has the ability to meet with potential buyers in person with or without the business owner to facilitate the presentation of information and negotiations.

     

    1. Selection of a business broker to sell a privately held company or family business is a BIG decision. It is prudent to vet a professional intermediary and their firm prior to signing a representation agreement.  A local business broker will likely be able to provide references of prior clients that can be interviewed and/or names of businesses in the same geographic area and/or industry that have been successfully sold.   It is also possible using tools like LinkedIn to determine if people are known in common in the local community.  Another great venue to evaluate the reputation of a business brokerage firm is with online reviews in venues like Google, Yelp, and Facebook.

     

    1. If, in addition to, owing a business the entrepreneur owns the real estate occupied by the business. It is prudent to select a local business broker with the appropriate real estate licensing who can provide comprehensive representation and sell both the business and property for their client.

     

    1. The purchase & sale of a business often requires formation of a transaction team. If needed, an established, experienced local business broker can provide referrals to local attorneys, accountants, wealth advisers, and bankers to assist with the completion of a “win-win” transaction in a timely manner employing “best practices” and mitigating liability.

     

    Iconic Seattle entrepreneur, Jeff Bezos famously said, “We see our customers as invited guests to a party, and we are the hosts.  It’s our job every day to make every important aspect of the customer experience a little bit better.”  In the purchase or sale of a business, the best customer experience is traditionally provided by a local business broker.

    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”.

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