IBA, as the premier business brokerage firm in the Pacific Northwest, is firmly established as a respected professional service firm in the legal, accounting, banking, mergers & acquisitions, real estate, and financial planning communities. Periodically, we will post guest blogs from professionals with knowledge to share for the good of owners of privately held companies & family owned businesses. The following blog has been provided by John Martinka of Martinka Consulting:
Represent Well and Be Rewarded (Part Two)
In my previous post I listed five traits of a good sell-side intermediary. In this post are six things a sell-side intermediary should do to be of greater value to their client and get a win-win deal done faster vs. slower.
Sell-side Intermediaries should:
• Not put lipstick on the pig – Not all businesses are ready for sale. It’s a fact of (business) life. Unless the seller has experienced a catastrophic event (divorce, death, disability, etc.) don’t be afraid to tell the seller the business needs a tune-up (or more) to sell for maximum price.
• Don’t get carried away on price – This also means don’t promise a seller a high price just to get the listing and don’t let the seller say he’ll list it only if you ask a certain price. Most small businesses have inflated prices, it’s the owners “baby” after all. A national brokerage firm released a study saying businesses offered within 10% of the “fair price” sold for a higher price than those priced over 30% above the “fair price.” The more unrealistic the price the more scrutiny the buyer will put the business under.
• Do your own due diligence, know what you’re selling – In my previous post I mentioned a broker who babbled on and on about the business’s operations and didn’t know what he was talking about. A good intermediary gets to know the business, puts it through a mock due diligence, knows the strengths, the blemishes and opportunities. Basically they do a SWOT analysis.
• Treat the buyer with respect – Don’t treat buyers like you’re on a used car lot. Even in 2015 I’ve had brokers try to pressure a client to make an offer after one meeting and having received only sketchy financial information, and no non-financial information. The purchase of a business will most likely be the largest transaction the buyer will ever make, and they’re nervous; they want to do the right thing and that starts by asking the right questions and getting the right answers.
• Don’t diminish the owner’s role – 99% of small businesses depend on the owner to some extent. Trying to convince the buyer the seller does next to nothing in, on or for the business sounds like a tired sales pitch. They may not work as hard as they used to but they add more value (in less time). Gary only worked a few hours a day, doing some bookkeeping. But Gary knew the business so well that in those few hours he could easily see things off-kilter. Things that would take you, me, or any buyer a week to figure out.
• Screen buyers – Don’t be afraid to not show every business to every buyer. Learn the buyer’s skills, interests and experience. Buyers lose respect for the intermediary when, for example, the buyer says they have manufacturing experience and don’t want retail or restaurants, only to have broker “push” a restaurant on them. You can’t pound a square peg in a round hole.
Business brokers, investment bankers, aka, intermediaries, can add tremendous value for the seller. They are the conduit to a deal. So what’s the overall premise of the previous post and this post? It’s, if the intermediary has a good business to sell they don’t have to “sell.” The business will take care of that with some massaging and management from the intermediary.
John Martinka is known as The Escape Artist® for his work helping executives escape the corporate world and helping owners prepare so they can sell with style, grace and more money. You can reach him at 425-576-1814 or www.martinkaconsulting.com. His books, Buying A Business That Makes You Rich and If They Can Sell Pet Rocks Why Can’t You Sell Your Business (For What You Want)? are available in paperback and for the Kindle at www.amazon.com.