02 Nov Three Factors Needed for Success
In our previous article, we explored some of the foundational tips that Business Brokerage expert Glen Cooper recently offered in his latest BBP webinar, The 5 Hardest Things to Learn in Business Brokerage.” Cooper’s decades of experience in the industry have led him to a variety of interesting conclusions that offer actionable information. Let’s explore more of his ideas for how to build a strong foundation.
1. Find the Best Listings
One of the ways to determine the quality of a potential listing is to start the process in the optimal way. Be sure to have prospects sign a non-disclosure form. From there, Mr. Cooper has prospects share their financial information, such as tax returns and internal financials. He reviews this information before he has his first meeting with the prospect. The reason for this is that he needs to make a determination as to whether or not to he wants to list the business. You have limited time. As a result, you must choose your sellers wisely.
In terms of what information is presented to buyers, Mr. Cooper states, “I know that the review of your tax returns is not the best way to present your business. I have no intention of presenting it that way, but what I can do is convert your tax return data so that it shows your true cashflow.”
2. Remember Your Value
In making this point, Mr. Cooper effectively highlights a fact that you should never lose sight of. You are the expert, and you bring a unique skill set to the table. It is through that unique skill set that you are able to properly frame businesses. You are able to do so in a fashion that emphasizes their strengths and makes them more appealing to buyers.
3. Thoughtfully Approach Valuations
The issue of establishing valuation is a complex and multifaceted one. Mr. Cooper points out several key facts in this regard. First, buyers simply don’t understand business appraisals. Or as Mr. Cooper states, “They don’t talk that language.”
Additionally, what gets included in a listing is another area that needs attention. Inventory and real estate, for example, must be addressed. As Mr. Cooper notes, “If there’s real estate or inventory that is included, this must be added.” He also points to many other variables such as “extraordinary intangibles like copyrights, patents…and special equipment.” The bottom line is that valuation is not a straightforward process, but one that, once again, serves to emphasize the considerable skill and expertise that a business broker or M&A advisor brings to the table.
Finally, it is important that you never forget the “human and emotional” part of the equation. For example, Mr. Cooper discusses what he calls, “The Laugh Test.” He states, “I don’t want to be so aggressive that I fail to pass what I call ‘The Laugh Test’, which is when a buyer sees the asking price of a business and laughs at you. They don’t even consider buying it and just move on. You don’t ever want that reaction.”
Establishing the right price for a business and then making sure that you are working with a flexible seller will work wonders towards successfully selling a business.
At the end of the day, Mr. Cooper’s webinar helps to highlight the fact that Business Brokers and M&A Advisors are truly experts. You are required to balance and address many different elements to help your clients achieve success. It is important that Business Brokers communicate to the buyers and sellers what they bring to the table and how they contribute to achieving successful outcomes.