Steps Business Brokers Can Take to Help Owners Get Ready to Sell

Steps Business Brokers Can Take to Help Owners Get Ready to Sell

Jane Johnson has tremendous experience helping business owners get ready to sell their businesses. In our previous article, we introduced some of the key points and information that Johnson learned over the years working with countless business owners. In this article, we’ll continue to examine Johnson’s advice for business brokers concerning how they should help owners prepare to sell. In the process, this will build their client base.

Seller Education

Educating business owners is at the very core of Johnson’s approach. One of the key bits of wisdom that Johnson has to share is that business owners are usually not prepared to sell.

For example, Johnson points out that business owners must understand what they need to net for the sale of a business. Asking a business owner what their business is worth isn’t enough. Determining the value of a business should never be left up to the owner. Instead, business brokers have to dig into the financials and also guide the owner so that they understand how much they need to net out of the business. Having clean financials is essential for having a transaction not fall apart.

Sellers also must realize that they have to take steps to minimize risks ranging from environmental and OSHA concerns to vendor and customer issues. Sellers can also run into trouble by not understanding the tax implications involved in selling the business or how it will ultimately be taxed. Keeping with the theme of education, Johnson works to make sure that owners understand that they must diversify and keep as much wealth as possible outside the business in order to reduce their dependency on the sale.

As Johnson states, “We view it as part of our mission to educate sellers on the different types of buyers in the marketplace. Because we know with that education, they’ll be much more likely to go down the path and actually consummate a sale.”

With this mind, Johnson points out there are many “deal killers” which can, as the name clearly indicates, end a deal very quickly. Below are some of the key deal killers that business brokers and sellers alike should be aware of and plan for well in advance.

Potential Deal Killers

  1. Owner doesn’t know the value of their business
  2. Owner has an unrealistic price in mind
  3. Owner fails to understand buyers’ motivation
  4. Owners lack proper counsel
  5. Owner tries to sell to the wrong person
  6. Owner assumes that the best buyer is a local buyer
  7. The company is simply not positioned to be sold
  8. Improper documentation
  9. Owner does not have a plan for the sale.

In the end, Johnson believes that business brokers must emphasize to sellers that getting a business ready to be sold takes time. Or as she states, one cannot simply “flip a switch and increase a business’s value, instead it takes months or years of grooming.”

Another key point to emphasize is that business owners must remove the business’s dependency upon the owners. Johnson’s view is that it is critical for business brokers to educate owners as to what type of advisors they should have to help get owners “over the finish line.”

Ultimately, proper business owner education and planning in advance improve the transition outcome. Business brokers wanting to distinguish themselves from the pack should focus on reaching out to businesses early and stress the importance of beginning exit planning as soon as possible.

 
 
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