Lack of Experience Can Be a True Deal Killer
Most business owners excel at running their businesses but often lack the expertise needed to sell them successfully. This is where a seasoned brokerage professional can be invaluable.Many business owners try to save money by entrusting the sale of their business to someone with an MBA but without direct experience in business transactions. Unfortunately, this decision can lead to poor outcomes.Consider the example of a business owner who asked his nephew, a recent MBA graduate, to oversee the sale of his multi-location retail operation. The idea was to save money, but the nephew’s inexperience proved costly.
Key Issues Faced by the Business Owner and His Nephew
Missing Legal ArrangementsOne of the first issues was the lack of confidentiality agreements. This oversight allowed competitors, key employees, clients, customers, and suppliers to learn that the business was for sale, potentially harming the business’s value and operations. Additionally, the nephew used the company’s attorney, who lacked experience in business transactions, further complicating the sale.Incomplete DocumentationThe nephew prepared a Confidential Business Review (CBR) or Confidential Information Summary (CIM) but failed to include essential financial details, such as owner withdrawals, projections, and ratios. This lack of comprehensive information could lower bids or deter potential buyers. The business owner and nephew also neglected to involve the CFO in the process, which is crucial for due diligence.Failure to Properly Screen CandidatesThe nephew did not understand the importance of confidentiality agreements, due diligence, or the screening process. He failed to interview prospective buyers to assess their seriousness and financial capability, wasting valuable time and spreading the word that the business was for sale.
The Importance of Professional Assistance
Selling a business is often the most significant financial decision in a business owner’s life. Therefore, it is critical to seek experienced and competent assistance. An experienced business broker or M&A advisor understands the complexities of selling a business. While a well-meaning family member might want to help, without years of experience, they are not the right person for the job.
Benefits of Hiring a Professional Business Broker
- Confidentiality: Professional brokers ensure confidentiality, protecting your business from potential harm due to premature disclosure.
- Proper Valuation and Pricing: Brokers accurately value your business, ensuring it is competitively priced to attract serious buyers.
- Access to a Network of Buyers: Experienced brokers have extensive networks, increasing the chances of finding the right buyer.
- Marketing and Negotiation Expertise: Brokers know how to market your business effectively and negotiate the best terms.
- Focus on Business Operations: Hiring a broker allows you to focus on running your business while they handle the sale process.
- Navigating Legal and Financial Complexities: Brokers manage the legal and financial aspects of the sale, ensuring a smooth transaction.
In conclusion, while it might seem cost-effective to handle the sale of your business internally, the potential pitfalls and complexities make it essential to hire a seasoned business broker. Their expertise can make a significant difference in achieving a successful and profitable sale.For more information on how to successfully sell your business, visit Indiana Equity Brokers to learn about their proven process and free business valuation services. Additionally, discover the importance of confidentiality in business sales on their Confidentiality in Selling Your Business page.
