Selling a business is a tricky and complicated proposition.
We can say with authority that sellers who try to do it without the assistance of a team of professional advisors find the process to be longer and significantly more difficult than those who engage professional resources. Just think about the myriad of issues and tasks that need to be accomplished, from finding and qualifying buyers to doing a business valuation to writing the purchase agreement, and so on … the list of “to do’s” is simply staggering. And while all of the deal making is going on, you still have to run the business!
That’s why you need a team of professional advisors to make the sale of your business faster and easier. You need to engage experienced legal, accounting, investment banking, and consulting advice at the beginning and throughout the sales process.
Who Could Be On Your Team, and What Role Could They Play?
Chief Advisor / Quarterback
With all of the moving pieces and players involved in selling a business, it may be prudent to select one advisor from your team to serve in an overall quarterback role. Their job is to develop the master plan and coordinate the activities of the entire team to make sure a deal is done in a timely and efficient manner, with a focus on achieving the results you desire.
The attorney’s role permeates the entire sales process. He/she is often intimately involved in establishing the structure of the transaction, factoring in the risk consequences for the client, negotiating many of the tax and financial terms based on input received from the accountant, broker and banker, and coordinating the timing and sequence of events to effectuate a successful close of the transaction.
Brokers and investment bankers often play some similar roles, such as exposing the business, generating interest in it, and bringing buyers and sellers together. Sometimes, depending on the nature of the industry, the reputation and tenure of the business, and the scope of the proposed transaction, a broker’s services may or may not be necessary. Brokers typically are involved in smaller transactions, while investment bankers are involved in larger transactions.
A seasoned business broker can read the market, knows who’s buying what and who has resources, and can weed out the so-called “tire kickers” from serious buyers with sufficient financial resources who are well-suited to run a business like yours. They will also ensure that news of the sale remains confidential, that loyal customers, staff, vendors and suppliers find out only when you’re ready to let them know. An experienced business broker knows what paperwork to file, and when.
One of the key functions of a business broker is to act as a cushion between the buyer and the seller and negotiate the details of the deal at a time when emotions can, and do, run high.
Business Valuation Analyst
A valuation analyst is a professional who determines how much a business is worth. They read and dissect business financial documents, like the balance sheet and income statement, look at the physical property and intellectual property owned by the business, and question officers, directors, and management about the operation of the company to arrive at their conclusion. A Certified Valuation Analyst (CVA) will consider various valuation approaches and methods appropriate for your specific company to let you know what it might sell for.
When it comes to selling your business, the CPA’s responsibilities can be wide ranging. From providing guidance on the decision to sell and an initial estimate of value to helping prepare the company and its financial information to present to potential buyers, structuring a deal and assisting in negotiations. Your CPA will work closely with your attorney to ensure the legal documents address the plan and can also serve as the quarterback of your advisory team.
The role of an investment banker usually increases with the size of the transaction. In many of the larger acquisitions or mergers, it is the investment banker who may have initially suggested and developed the proposed structure for the transaction. Generally, it is their responsibility to assist on both valuation and funding.
Life Transition / Planning Coach
Because selling a business is fraught with emotion for many business owners, using the services of a life or transition coach may be a prudent way to deal with the discomfort from the unknowns and uncertainties of transitioning from owner to civilian. This role can become crucial where an owner is really agonizing over selling. A life or transition coach helps the owner chart a course through these emotional shoals with the goal of making your post-ownership life happy and fulfilling.
Wealth Management / Financial Advisor
While it’s likely that you have existing trusted financial planners and wealth management advisors, you’ll want to include them on your team early in the process. Since you probably will be selling your largest asset, you’ll need a plan to make sure that proceeds from the sale are handled correctly.
One last lesson about the value of working with a team of professionals: negotiation strategy. Using someone on your team to do negotiations is the way to keep emotions out of the process. An experienced negotiator will be a gatekeeper, and a skilled problem solver who can be instrumental in reaching an agreement.