Managing a business and presenting it to suitable potential buyers is a very complicated task. Selling your business on international level is much more difficult than selling in your own country. Selecting the right business broker, lawyer and an accountant with a history of successful international business sales experience is also very important. Find a team that has much experience as you can possibly afford because in the long process you will encounter complications along the way.
Develop an in-depth marketing plan were you can include your history and nature of the business, five year financial overview, business operations, business management and employees, competitive analysis, industry and market expectations, and business strategy and projections. This will be used to sell your business, so it is important that it is prepared well to project a professional image to potential business buyers. A well-developed marketing plan will make the sales process much easier.
Always screen your potential buyers through your broker regardless of where they come from. This is to make sure that only the serious business buyers who are qualified and can afford to buy your business will get to speak to you. This will also minimize the chances that competitors will find out that you are selling your business. Confidentiality is essential in business selling.
It is important that when selling your business to a foreign buyer, communication must be done in writing. This is because writing can reduce miscommunication and gives you time to research and clarify things. If you handle matters over the phone or in person, selling your business can become very frustrating.
Another thing you need to consider is that you should never negotiate without your broker. You may not know how to handle a foreign buyer even if you may be an expert at selling a business in your country. Despite all of the hassles and problems that may be encountered, you should be able to get a great price for your business with a good business broker.
In addition, you should never negotiate without your broker. While you may be an expert at selling a business in your country, you may not know how to handle a foreign buyer. With a good business broker, you should be able to get a great price for your business despite all of the hassles and problems that can appear. A well-developed marketing plan will make the sales process much easier.
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Perhaps the most important business transaction you will ever pursue is the sale of your business. Many business owners attempt to do it themselves and when asked if they got a good deal, many respond with ?I think so,? or ?I got my asking price,? or ?I really don't know,? or ?It was a disaster.? Often times these very capable business people approach the sale of their business with less formality than in the sale of a home. The purpose of this article is to answer the questions ? Why would I use a business broker and what am I getting for the fees I will pay?
1.Confidentiality. If an owner tries to sell his own business, that process alone reveals to the world that his business is for sale. Employees, customers, suppliers, and bankers all get nervous and competitors get predatory. The business broker protects the identity of the company he represents for sale with a process designed to contact only owner approved buyers with a blind profile ? a document describing the company without revealing its identity. In order for the buyer to gain access to any sensitive information he must sign a confidentiality agreement. That generally eliminates the tire kickers and deters behaviors detrimental to the seller's business
2.Business Continuity. Selling a business is a full time job. The business owner is already performing multiple functions instrumental to the success of his business. By taking on the load of selling his business, many of those essential functions will get less attention, sometimes causing irreparable damage to the business. The owner must maintain focus on running his business at its full potential while it is being sold.
3.Time to Close. Since the business broker's function is to sell the business, he has a much better chance of closing a transaction faster than the owner. The faster the sale, the lower the risk of business erosion, customer defection, employee problems and predatory competition.
4.Large Universe of Buyers. Business brokers subscribe to databases of businesses that enable them to screen for buyers that are in a certain SIC Code and have revenues that would support the potential acquisition. In addition they maintain databases of high net worth individual buyers and have access to private equity groups databases that outline their buying criteria.
5.Marketing. A business broker can help present the business in its best light to maximize selling price. He understands how to recast financials to recognize the EBITDA potential post acquisition. Higher EBITDA = higher selling price. He understands the key value drivers for buyers and can help the owner identify changes that translate into enhanced selling price.
6.Valuation Knowledge. The value of a business is far more difficult to ascertain than the value of a house. Every business is unique and has hundreds of variables that effect value. Business brokers have access to business transaction databases, but those should be used as guidelines or reference points. The best way for a business owner to truly feel comfortable that he got the best deal is to have several financially viable parties bidding for his business. An industry database may indicate the value of your business based on certain valuation multiples, but the market provides the real answer. An industry database, for example, can not put a value to a particular buyer on a key customer relationship or a proprietary technology. Most business owners that act as their own business broker get only one buyer involved ? either another business that approaches him with an unsolicited offer or a referral from his banker, accountant, or outside attorney. Just look at the additional billion plus dollars of value created for MCI shareholders because of the competitive bidding between Verison and Quest Communications.
7.Balance of Experience. Most corporate buyers have acquired multiple businesses while sellers usually have only one sale. In one situation we represented a first-time seller being pursued by a buyer with 26 previous acquisitions. Buyers want the lowest price and the most favorable terms. The inexperienced seller will be negotiating in the dark. To every term and condition in the buyer's favor the buyer will respond with, ?that is standard practice? or ?that is the market? or ?this is how we did it in ten other deals.? By engaging a business broker the seller has an advocate with a similar experience base to help preserve the seller's transaction value and structure.
8.Maximize the Value of Seller's Outside Professionals. Business brokers can save the seller significantly on professional hourly fees by managing several important functions leading up to contract. His compensation is usually comprised of a reasonable monthly fee plus a success fee that is a percentage of the transaction value. The business broker and seller negotiate with the buyer the business terms of the transaction (sale price, down payment, seller financing, etc.) prior to turning the purchase agreement over to outside counsel for legal review. In the absence of the business broker that sometimes-exhaustive negotiation process would default to the outside attorney. It is not his area of expertise and could result in significant hourly fees.
9.Maintain Buyer ? Seller Relationship. The sale of a business is an emotional process and can become contentious. The business broker acts as a buffer between the buyer and seller. This not only improves the likelihood of the transaction closing, but helps preserve a healthy buyer ? seller relationship post closing. Often buyers want sellers to have a portion of their transaction value contingent on the successful performance of the company post closing. Buyer and seller need to be on the same team after closing.
Our experiences with businesses that engaged our firm as a result of an unsolicited offer from a buyer have been quite instructive. The eventual selling price averaged over 20% higher than the first offer. In no case was the business sold at the initial price. To conclude, the business broker helps reduce the risk of business erosion with improved confidentiality while allowing the owner to focus on running the business. The business broker led sale helps maximize sales proceeds by involving a large universe of buyers in a competitive bidding process. Finally, the business broker can improve the likelihood that the sale closes by buffering buyer ? seller negotiations and by balancing the experience scales.
Both Brian Ernst & Dave Kauppi are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.