Assembling Your Business Sale Team

One of the most important decisions you can make when choosing to sell your business is your selection of professionals who will guide and assist you through the selling process. Nearly all sale teams include an accountant and an attorney and many also rely on the expertise of a business broker – an experienced professional with the skills and resources to maintain confidentiality while guiding you through the process from sale pricing to marketing to negotiation to closing the sale and transferring the business. It is impossible to overstate the value of experienced advisors in a business sale. No business owner, no matter how small the business or how seemingly uncomplicated the sale deal, should sell without, at the very least, first seeking financial and tax advice. In addition to the necessary expertise of an accountant and an attorney, many owners also rely on a business broker or M&A advisor, and, depending on unique circumstances, some owners will also seek input from appraisers, valuation experts, and business consultants.

Deciding Which Advisors to Include on Your Business Sale Team

While you alone make the decision to sell your business, every step after that decision benefits from professional advice. Which advisors you select for your team depends on the nature of your business, your personal marketing and negotiating capabilities, and the time you can devote to the selling effort. Business sale-team advisors include everything from accountants and lawyers to business brokers and valuation appraisers.

An Accountant

CPAs or accountants, especially ones who have experience with sales of businesses of your size and type, deliver essential advice throughout the sale process. They provide valuable assistance formulating preliminary valuations of the assets and goodwill of your business, setting the sale price, preparing financial statements, reviewing business tax filings, estimating and mitigating tax liabilities, structuring the deal, assisting during the buyer’s due diligence, and also conducting due diligence, on the buyer’s financial condition and ability to complete the purchase. They also provide essential expertise when assessing and weighing the tax impact of buyer price negotiations and throughout the closing process.

An Attorney

An attorney provides essential advice during sale preparation, due diligence, buyer-seller negotiations, and sale closing. Even the smallest and least-complicated business sale should involve the advice of an attorney experienced in selling businesses. Long before the necessary task of drafting or reviewing the purchase and sale agreement and other paperwork, your attorney will assist in reviewing the condition of contracts, leases, loans, and other legal obligations of your business, reviewing and negotiating the buyer’s purchase offer, and providing advice regarding legal ramifications from issues that arise during sale negotiations.

A Business Broker or M&A Advisor

A broker or M&A advisor provides valuable advice and assistance while helping to maintain necessary confidentiality through every step of the sale process — preparation, pricing, marketing, due diligence, negotiation and closing. The broker’s role is especially important for business owners who have limited experience in selling, whose buyer pool is broad and difficult to reach, and who lack time to both run the business and sell the business without endangering the strength of the business.

Consultants

Consultants can assist in overcoming business challenges by providing insight and experience to improve business strategy, marketing, finances, operations, management, technology, or other aspects of the business. They are especially valuable when the business selling price could be significantly higher with major business improvements beyond the expertise of the business owner and management team, and when the owner has a generous pre-sale preparation timeframe for improving processes, organization, marketing, sales, and use of business resources.

An Appraiser

An appraiser or valuation expert is necessary for a business with difficult-to-assess intellectual property, proprietary processes, a valuable brand, other high-value intangible assets, or real property. (Some brokers provide appraisal assistance, but be aware that many buyers, when considering businesses with high-value intangible assets, consider only valuations by credentialed appraisers. See the upcoming section titled “Selecting an Appraiser.”)

Determining Whether and How to Hire a Business Broker

Businesses marketed by their owners rather than by brokers are called “for sale by owner” or FSBO, exactly as you see in the housing real estate market. Typically, business owners go the FSBO route if:

• They cannot find a broker interested in representing the business for sale.
• They don’t want to pay the broker’s commission, also called a success fee, which is normally a percentage of the final purchase price and may vary depending on brokerage, deal size, and structure.

They want to maintain complete control and feel they can handle the process themselves. Even if you can go it alone, before opting for that route, consider the role brokers play:

• They serve as advisors with in-depth insights on valuation, marketing, prospecting, negotiations, and other fundamental sale elements.
• They can ensure confidentially while marketing your business to qualified buyer prospects.
• Most have extensive prior business experience and understanding of the financial, operational, and legal issues of selling and transitioning businesses.
• They facilitate and streamline the selling process, allowing the owner to focus on operating the business.

Selecting Your Business Broker

Although there is some crossover, and some brokers serve businesses of all sizes, most brokers fit into two categories: businesses worth more than $2 million dollars are usually sold by mergers and acquisitions (M&A) specialists. Smaller businesses typically work with Main Street business brokers. When interviewing brokers, base comparisons on the following factors:

Credentials & Training

• Is the broker a member of a state or regional broker association?
• Is the broker licensed to sell businesses in your state? Many states require a real estate license.
• Does the broker have other credentials or training, for example CPA, MBA, or other professional certifications?

Experience

• How long has the broker been in business?
• Does the broker work full time or part time?
• Does the broker work independently or as part of a broker group?
• Does the broker have experience with businesses similar to yours?

Performance Record

• How many listings does the broker have annually?
• How many annual sales?
• What is the average sale price compared to average asking price of the broker’s recent annual sales?

Marketing Strength

• How professional is the broker’s site and is it well-optimized for search engines?
• How many prospective buyers are in the broker’s database?

Marketing Approach

• How would the broker price your business?
• How would your listing be marketed?
• How does the broker use online business-for-sale listing sites, and which ones?

Contractual Arrangements

• What is the broker’s fee? (Broker fees are typically a percentage of the purchase price or a pre-set fee; whichever is greater.)
• What is the length or term of the listing agreement? For example, 6 months, 12 months, 18 months.
• Does the broker charge a cancellation fee if you withdraw the listing?
• Does the broker charge a trailing fee if, after the listing agreement expires, you sell the business to a buyer who was referred by the broker?

References

• Will the broker provide names and contact information so you can interview recent clients?

Determining the Need for an Appraiser

If the price of your business will include the value of difficult-to assess assets, plan to obtain a formal business appraisal that will hold up under the buyer’s review during due diligence. If your business owns valuable intangible assets, including such assets as trademarks, patents, copyrights, trade secrets, proprietary processes, or a valuable brand, obtain valuation advice from a business appraiser and preferably one with a professional designation from a recognized trade association. Although your accountant or broker may be able to provide such an appraisal, especially if the assets have high value, to avoid buyer challenges or objections during due diligence, seek an appraiser with one of the following credentials:

CBA - Certified Business Appraiser | ASA - Accredited Senior Appraiser | CPA/ABV - Certified Public Accountant Accredited in Business Valuations | CVA - Certified Valuation Analyst | CBV - Chartered Business Valuator.

If your business owns valuable real property, seek assessment advice from a real estate appraiser.

Maintaining Confidentiality

Customers, competitors, suppliers, employees, and creditors will all react, and often against your interests, if they learn that your business is for sale. Even buyer prospects often have negative reactions if they learn a business opportunity hasn’t been kept confidential. Before listing your business and attracting buyer interest, work with your legal advisor to create confidentiality agreements for use when dealing with sale advisers and other confidants. Otherwise, you risk disturbing the confidence of your staff, suppliers, or customers, which is the last thing you want when you’re working to keep your business value at its highest.

There are a variety of business sale-team advisors to consider hiring to help ensure a smooth selling process. An accountant is essential to provide financial and tax advice during sale preparation, pricing, due diligence, negotiations, and closing. An attorney will provide legal counsel during sale preparation, due diligence, sale negotiations, and closure. A business broker or M&A advisor is important throughout the sale process, especially for owners who have limited sales experience, whose buyer pool is broad and difficult to reach, and who lack time to both run the business and sell the business without endangering business strength. Consultants are valuable when the business selling price could be significantly higher and when sellers have an exit time frame that allows for business improvements. An appraiser is important when business pricing includes intellectual property, proprietary processes, a valuable brand, other intangible assets, or real property. Brokers and accountants can often provide appraisal assistance but a credentialed appraiser with a professional designation from a recognized trade association is often required to reduce buyer challenges.

When seeking a qualified broker to help sell your business, search the BizQuest Broker Directory, which includes thousands of qualified professionals.