I recently received a press release of a new offer of “Business Brokerage Secrets Revealed”. It got me thinking. Are there some clever secrets we possess that could help business owners maximize their sales price?
No. There are no special secrets like that.
But since you clicked to view this post, I’ll detail at the end some dirty little secrets some brokers employ – but they are mainly to land engagements, not sell companies.
First, what is the secret to selling a business? If I were to boil it down to a paragraph each for small and mid-size businesses:
Business Brokerage Secrets to Selling a Small Business
Selling a small business requires doing many things well, and paying attention during all aspects of the deal. Many believe finding a buyer is all brokers do, however also important are the packaging of the business, screening of buyers, negotiation, due diligence and finding solutions to the myriad of challenges and problems that each deal faces. The secret then, is to find an experienced broker that is a jack-of-all-trades – someone that employs a combination of education and experience to put it all together and keep the deal moving through to the end.
M&A Secrets to Selling a Mid-sized Business
Marketing is the secret. A jack-of-all-trades broker isn’t important because good M&A firms work as a team, although an experienced advisor or “dealmaker” is important to help negotiate price and deal structure. The secret sauce, however, is getting the opportunity out there in the market and getting the maximum number of prospective buyers interested in bidding. Thus it is important to find a firm that can market your business to a wide reaching audience, here and internationally.
Dirty Little Business Brokerage Secrets Revealed
I thought about this, and if there are any secrets, here they are:
– Unscrupulous brokers tell business owners they have a buyer for their business in order to land an engagement to sell their business. (Many use the phrase, “We may have a buyer for your business”, which is technically a lot better although what they usually mean is, “We may be able to find a buyer for your business if you give me a few months”)
– Devious brokers will provide an inflated business value to business owners in order to land an engagement to sell the business. For business brokers that don’t charge an upfront fee, the goal is to attract the owner to their firm with an inflated valuation, then convince the seller to decrease the price in a few months when there is no activity. For M&A firms that charge an upfront fee, the goal is to give the business owner good news about their company value, get the engagement and get the fee. That’s it, there is no other goal, like actually selling the business.
– Overly ambitious brokers (mostly just na?ve) will overestimate a business’ earnings in order to inflate the selling price. For example, a common area is forgetting to adjust for rent if the seller owns the building. By the way, it doesn’t work (see, There are no Stupid Business Buyers).
I know some of my readers are business brokers. Did I leave out some deep dark secret?
Want to learn more? I’ve organized and categorized my blog posts into a free online guide on how to sell a business: www.sellbusinessguide.com