One of my Dealmakers (synonymous with the title Broker Associate, but Dealmaker is more descriptive) was recently approached by a business owner about using our services to help sell his company. The business owner had recently elected to use an out-of-state business broker to assist him in selling his business. After a year of very limited activity and without one visit from the firm, even when a potential purchaser came to visit the business, the business owner began to regret his decision.
Similarly, last month, I was contacted by a business owner who had attended a seminar conducted by a large out-of-state business brokerage firm. The business owner was enamored by the concept of a price far in excess of the fair market value of the firm and signed an agreement that included a $35,000 non-refundable retainer. The business was put on the market at a price that was almost double what our 35-years of experience indicated the business was worth.
After about two years on the market, the company had received only a single offer at approximately the value we originally placed on the company. The business owner called us as a result of the out-of-state firm commenting about the competition being across the street from the business, which was incorrect.
If you are considering the sale of your business, which may be your most valuable asset and the cornerstone of your retirement plan, you need to be prudent in your choice of firms to represent you. At The FBB Group, we believe it is important for us to be at every meeting between buyer and seller and to participate in virtually every phone call when a transaction is being negotiated. We know and have worked with a number of local transaction law firms, accounting firms, and transaction lenders. Coupling the knowledge gained in our many years of doing business with the significant resources established through our ongoing working relationships, we aim solely to maximize the benefit of our clients.
We will, on occasion, represent an out-of-state client. For example, we are representing a manufacturing business in California because we successfully advised that business owner in the sale of two other companies while he was living in Colorado. After selling his second business, the entrepreneur moved to California and started his existing company. When it was finally time to retire, he called us to represent him, yet again.
In my mind, the only way to do the job properly was to “partner” with an existing intermediary firm in California, and I chose one that I had worked with for many years on various assignments. When The FBB Group identified a buyer for the business, the other broker in California met with both the client and buyer group. We are currently in the process of negotiating a Letter of Intent on that transaction.
If you are a business owner considering a potential sale, do your homework and make sure that you have “boots on the ground” readily available to assist you in the complex task of achieving a successful sale. Ask for and check references.
The majority of our business is derived from referrals. Please consider referring our services if you encounter a situation involving the potential purchase or sale of a business.
Ronald V. Chernak
Inspiring business relationships since 1982!
(originally posted in the August 2017 newsletter)