01 Aug Around the Web: A Week in Summary
A recent blog post from Certified Business Brokers entitled “Training New Owners After Selling a Business” discusses the importance and expectations of training after a sale is completed.
Training a new owner on things like company policies, procedures and relationships with vendors allows for a smoother transition from one owner to the next. While it’s important to provide the training the buyer needs to successfully run the business, a seller should not expect to stay as a trainer for longer than one to two months without being compensated for their time. The idea is to prepare the buyer to run the business on their own without seller help.
The content covered during training should be relevant to the buyer’s questions and areas of weakness. Sitting down together to write out a training plan is always a good idea, that way the training period is as effective and efficient as possible. Most importantly it is critical that everyone in this situation is on the same page and in agreement of all terms.
A recent article from Allan Taylor & Co. entitled “Signing a Business Broker’s Contract? Read This First.” walks through the most important aspects of a business broker’s contract. The article outlines how it should look and what red flags to look out for such as:
- What the contract looks like: both the length and appearance of the contract can tell you a lot about the broker’s level of experience and quality of work.
- Commissions: While there is no standardization on business broker fees and rates, it’s important to know what to look for. The typical range is from 8% to 12% commission and the Double Lehman scale is often used for sales over $2 million. Also be aware of what is included in the transaction value that their commission is based on, arguing with a broker on their commission once you’re already mid-process is a potential nightmare!
- When the broker gets paid: While most business brokers typically get paid at closing, this can vary from broker to broker so be sure to read closely for specifics on when they expect to get paid, what fees (if any) they charge and if they operate on a payment plan.
- Duration and termination of contract: This could be anywhere from an agreement to terminate at any time with a 30-day notice from either party to a six month or one year contract. Be aware of what the terms are for termination and if there are any fees associated with termination of a contract.
- Exclusivity: Most business brokers with ask for the exclusive right to sell your business. This means that you won’t engage any other professional to sell your business, and you will owe the broker a commission regardless of who finds the buyer.
As always, make sure to be clear on what the expectations are on either side and to negotiate any terms you’re uncomfortable with. You can tell a lot about their negotiation style when you ask them questions about their contract.
A recent article from Divestopedia entitled “Here Today, Gone Tomorrow: What’s your Contingency Plan?” discusses the potential consequences of an unforeseen departure from your business, and what you can do about it.
Just because your departure could be unplanned and unexpected, doesn’t mean you can’t be prepared for it. A sudden leave from your business could leave employees in a state of competition, your competitors poaching your best customers and employees and your family struggle for financial stability as your business wavers. Having a proper contingency plan sets your business up to continue running smoothly if you were to ever be unavailable to continue running things unexpectedly.
Making sure your employees know how their roles would change, having incentive plans in place to ensure employee and customer retention, and having life insurance are the crucial building blocks to a strong contingency plan.