One form of exit – Sell the business
Karl R. LaPan, President & CEO, The NIIC
Every investable startup must have a credible exit; however, most don’t.
By default, most startups usually provide the perfunctory strategies of selling to a strategic buyer, doing a roll-up, or executing on an IPO. With only 190 IPOs last year (half of the number of IPOs twenty years ago), it is an unlikely strategy for the 3 out of 1,000 people who start a business every month in the United States.
While selling a business can prove to be lucrative, there’s a lot that enters into the equation. That’s why sometimes it makes sense to seek out the assistance of a business broker. He or she acts as a de facto agent for businesses, helping set the asking price, find potential buyers, and market the company to the right audience.
But how exactly do you find the right broker to sell your business? The following are a few considerations to keep in mind as you do your due diligence and keep in mind these benefits or dividends highlighted (in the hyperlink):
1. Thoroughly vet the potential broker.
Does the potential broker have a network of contacts in and around your likely industry? The best business brokers are not just transactionally focused. They are focused on finding the right organization to take your business to the next level. A key indicator of their compatibility might be the specific industries they’re familiar with and how many of their past and present listings fall within your particular industry.
Be wary of statements like the one made by Raytheon and UT of a merger of equals. There is no such thing, and any organization that believes there is will inevitably fail. With over 90% of acquisitions failing to achieve the pro forma synergies (new revenue opportunities and expense reductions), there is more downside than upside in keeping your culture intact after you sell. Be emotionally ready. Despite what you read and what you are promised, things (culture, rhythm etc) will not be the same, even if you are promised a merger of equals.
2. Evaluate their business and marketing practices.
It takes more than listing your business in a directory to sell your company. Right now, there are more than 74,000 businesses for sale on the website Businessesforsale.com alone. How can you expect to find a quality buyer when there’s so much noise?
Instead, look for a broker who employs both inbound and outbound marketing strategies. Beyond an online presence, he or she may have access to an exclusive “go to list” of targeted relationships – high net worth individuals, family office private equity groups to get solid results. Thus, a multi-channel marketing strategy is essential to maximizing your exposure and your potential value.
Check references carefully to see how well they served their clients and how satisfied past clients are with the results the broker achieved. Check to see if the business broker has obtained additional expertise through certifications, professional development, or involvement and affiliation in professional associations that shows learning agility, credibility and adherence to high standards.
3. Round off your professional advice.
Tap into your professional network of trusted advisors. For example, you might attend industry events and ask your peers whether they know anyone in the market to buy a business. You might tap into the expertise and connections of your business attorney, CPA, or banker. These experts may also have insights into people or companies that might be potential acquirers.
Business brokers, backed by high levels of professionalism and experience, can give sellers an edge in the marketplace. The important thing is to understand your needs, do your homework ahead of time, and stay engaged throughout the process. Watch for the red flags or signs things are not going as planned.
Also, don’t forget we’re at the ready to help coach and guide you through the process. While we are not a broker, our professional network spans diverse industries, organizations, and professions worldwide, giving us–and you–particularly valuable access to a circle of influence and a team of trusted advisors. To learn more about our comprehensive resources, contact us at The NIIC.