Buying and Selling a Business

... From Biz2Biz NWA January 2009

Part One: The Big Deal Connects with the Right Team

By Tami Greever / Crye-Leike / Bentonville

Who you choose to be on your team when you sell a business can make make the difference between deal or no deal. We start choosing teams when we’re young—picking buddies and winners from yesterday’s game.

In the business world, the stakes are more memorable than honor gained or lost on a dirt field; yet, unfortunately, team players are often selected in exactly the same manner. If by chance the first professional is hired based on past performance, the seller can only hope that the extra players are based on excellence and expertise rather than personal ties.

Assembling your sales team is an important matter. Understanding the purpose for each member on your selling team is imperative. No single professional plays every position. While there could be a different hierarchy in which the team is assembled, the basic seller’s team consists of:

• Bookkeeper or accountant
• Appraiser (if real property is involved)
• Business broker
• Attorney
• A closing company

The scope of the business will determine if additional expertise is required and sellers shouldn’t underestimate the benefit of a financial advisor throughout the selling process.

You might feel hesitant if your team members don’t seem to share the same entrepreneurial spirit that motivates you– and all small business owners– to take risks. They may not seem to consider the potential or believe that you, the customer, is always right. Instead, remember that their point of view, however conservative, offers a valuable perspective, perhaps even gives subtle clues as to how a potential buyer will see the business.

That said, personality clashes can and should be overcome, but delays should be avoided. Time is of the essence and the timely flow of information can make the difference between closing a deal and losing a buyer.

Take precautions when choosing your attorney. A business sale requires a competent transaction attorney. Except in complex situations, a deal will rarely move forward with a negotiating attorney. The outcome in this scenario could be likened to a player attempting to pitch and hit at the same time. Not only is team loyalty diminished, the game becomes a drawn-out bore.

Generally, deals are done when attorneys scribe the details properly, flush out potential issues, note possible exposure, reflect the local law, and assemble closing. Sellers should make the ultimate decisions, not the attorney, and an attorney who attempts to drive the players into submission does nothing to benefit an already anxious event.

Look for accountants and bookkeepers willing to provide documentation in the form buyers expect. To do otherwise may arouse the buyer’s suspicion. If the buyer requests specific tax information and schedules, for example, the accoun¬tant must provide exactly that. For small businesses, forms generated by typical accounting software may suffice.

When you engage a business broker, they need to make sure the flow of information passes seamlessly and in a timely manner. When choosing a business broker, look at criteria other than commission alone. You’ll need commitment, because selling a business is likely to take six months to a year. You should feel free to ask key questions that help you understand the broker’s process, commitment level, and what their service entails.

• Will you be provided an asking-price valuation?
• Will your business be pre-qualified by a lending institution or financier?
• Can you review sample listing pro¬files and the list of venues in which your business will be marketed?
• Does the broker have a network of potential buyers already established?
• How many brokers within the sales organization are motivated to procure a buyer?
• Has the broker assembled a team of business professionals who operate smoothly together?

Throughout the selling process, you should be able to expect your business broker to provide feedback, updated tax information, keep the listing fresh with significant changes, and update financials with current P&L statements.

You may want to revisit the asking price if potential buyers are not forthcoming, and you’ll want updates about potential buyers. You’ll want a broker who is forward thinking when negotiating, and direct in the process through closing. This is not a short list, nor a short-term relationship.
Be sure to engage a broker who is personable and enthusiastic because that same person will provide the first impression of your business.

In much the same vein, the buyer will be faced with gathering a similar team of professionals. While a business broker generally represents the seller, a reputable broker realizes a fiduciary responsibility to the buyer, and should be motivated to provide whatever information proves useful to the process.

Whether buyer or seller, the big deal in business is putting the best players on the field. Success starts and finishes with a good business team.

Author/ expert Tami Greever is a seasoned entrepreneur and Business Broker/Realtor¨ pioneering with Crye-Leike Commercial in Northwest Arkansas.