Your Exit Strategy
Benefits of Using Professional Representation
Business Broker Commissions
The Business Sale Process
Listing Your Business For Sale

As a business owner, sooner or later you will consider an exit strategy, that is, how to remove yourself from the day-to-day operations of the business.

Each owner has different goals and needs when exiting a business. Some want to retire. Some are ready to start a new venture. Sometimes multiple owners in a business decide they need to go their own separate ways.

Finding a buyer for the business is an exit strategy which meets the needs of many business owners.

You may be a business owner who is very knowledgeable about the purchase and sale of businesses in your industry. You may have acquired a company yourself in the past.

Other owners are narrowly focused on creating a successful company, and do not pay much attention to sales, mergers and acquisitions in their industry.

Whichever kind of owner you are, professional representation offers your best opportunity to maximize the return from the sale of your business.

Brokers handling business sales generally fall into three categories. Investment bankers deal in the high end of the market, handling companies valued over $20 million or so. Often the buyers and sellers in these transactions are publicly traded corporations.

Intermediaries, or middle-market business brokers, deal in roughly the $1 to $20 million dollar range. "Main Street" business brokers deal in small businesses.

You may be an entrepreneur, and one of the traits that define entrepreneurs is a do-it-yourself approach. Here are a few reasons why a higher price, better terms and a quicker sale of a business can be achieved, not by doing it yourself, but by using professional representation when selling your business.

• Most business owners who sell without a broker deal with only one prospective buyer. A business broker can immediately expose your business to hundreds of potential buyers nationally to increase the chances for multiple offers.
  
  
• A business broker can objectively look at the strengths and weaknesses of the business, gauge its market value and cast the future prospects of the company in the best possible light.
  
  
• As a third party, the business broker can deal with prospective purchasers in a way that protects the confidentiality of the seller. Many business owners feel that the reputation and value of a business would be diminished if their customers knew it was for sale.
  
  
• Inquiries about the business are screened by the broker so you do not waste time with unqualified potential buyers.
  
  
• The business sale process can typically run several months. The business broker birddogs each step of the process to allow you to devote your time and attention to running the business.
  
  
• Business brokers with additional credentials, such as Certified Public Accountant and Certified Business Appraiser, can provide valuable consulting services for your sale transaction.
  

Most business brokers are compensated based on a percentage of the sale price. This commission is referred to as a "success fee" or "accomplishment fee" in some circles. 10% is a common success fee for sellers to pay.

For large businesses, commission rates vary, and usually the rate goes down after, for example, the first $2 million of sales price. Commissions are not set by law or the industry, they are set through negotiation between the business owner and the broker.

Most brokers of larger businesses charge non-refundable fees at the beginning of the listing for the cost of preparing appraisals, marketing materials and advertising. Usually, these advance fees are credited against the broker's commission.

The process begins when a business owner and broker sign a listing agreement. The listing agreement is for a set time period. In the agreement, the broker promises to work diligently to find a qualified buyer for the business, and the owner promises to pay the broker a commission if a qualified buyer is found.

A market analysis or appraisal of the business will be performed. During this process, information will be gathered about the past financial performance of the business, its current financial position, its future outlook and many other aspects of its operations and position in the market. Marketing materials, such as an executive summary, will be prepared.

Potential buyers for the business will be identified. This can be done in a number of ways including making contact with leading companies in the industry and blanket mailing to investment bankers and merger/acquisition specialists around the nation.

When interested buyers are identified, the broker will work with them, providing additional information as necessary and bring any offers back to the owner. After an offer-counteroffer process, a letter of intent will be drafted containing the general terms of the sale agreement. Attorneys for the buyers and sellers will then draft final sale documents and the closing will occur.

Please contact Strategic Business Sales if you would like more information about listing your business for sale.

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