Choosing A Business Advisory Firm
Following are a number of valued attributes a Trusted Advisor should provide in assisting a Business Owner from planning through successfully closing and funding the sale of a business. The majority of Business Owners have never sold a business… Therefore, it is important to understand the role an Advisor plays acting as an Intermediary or Broker. It’s also important to understand what the Owner’s expectations of the Advisor should be. Business Brokerage is largely an unregulated industry so a Business Owner should take great care in entrusting what is likely their most valuable asset to anyone but a highly trained and experienced professional.
Educating and Coaching Owners
As the majority of Business Owners have never closed a business sale transaction, hiring a quality Business Advisory Firm is critical. From the very first meeting, a quality firm of highly trained Advisors will educate and guide a Business Owner through the process. The process starts with proper assessment with the readiness of a business for potential sale with a careful analysis of several key value drivers. From there, an effective Advisor will help the Business Owner and any key staff involved to focus on the right things throughout the remainder of the process.
Preparing a Company for Sale
Business Owners are rarely prepared for the intense scrutiny they will be subject to by Buyers when selling their business. A top quality Advisory Firm will prepare a Business Owner for this by performing a thorough business analysis prior to going to market, then acting as a buffer between the Buyer in a professionally respectful manner. Thorough preparation is important in order to be ready to consistently and persistently communicate the right message to the right Buyers so valuable lead generation efforts are not wasted.
Managing the Sales Process
It is important to look for an Advisor that is ready to take on the role as quarterback for the entire process of selling a business. Advisors to a business actively on the market, are key players responsible for properly presenting the best image and value of the opportunity. The Advisory Firm should also be seen as the backbone, coordinating all aspects of the selling process, contract-to-close process and, integration with the team of professionals needed to finish the deal such as Attorneys, CPAs, Bankers, and more… The Advisory Firm is also key in managing the due diligence process – keeping a transaction moving forward towards closing.
Expect your Advisor to be capable of identifying gaps in your professional team. An Advisory Firm should have the ability to provide coaching and/or reference to professional sources invaluable in preparing a business for sale. As an example, a business with substandard accounting should secure the right help or all other preparation for sale will be futile. Clean, understandable financial reporting and documentation is a must for not only selling a business but in planning and preparing a business for sale.
Enabling Owners to Run Their Business
Preparing a business for sale, marketing, fielding Buyer inquiries, offers and the contract-to-close process are all intensive and distracting for Business Owners to endure – particularly when added to running day-to-day operations. A quality Trusted Advisor will perform a thorough and methodical analysis and on-boarding of a business allowing little interruption with day-to-day business with the goal of allowing an Owner continued focus and growth of a business to maximize value in the eyes of a potential Buyer.
Advisors supplement a Business Owner’s knowledge of their markets and potential acquirers by tapping into their professional contacts, networks, prospective buyer databases, in combination with expertise in identifying and connecting interested/qualified candidates. The value of an Advisor at this stage of the process is twofold… First, industry statistics tell us that an Advisor must field 100 inquiries for every 1 potential Buyer for a business. Add further due diligence to determine the potential Buyer’s interest in a specific business AND their qualifications to actually make the acquisition – it becomes easy to see the staggering number of inquiries that must be fielded to get to just ONE potential Buyer for ONE specific business. Second, a highly trained and experienced Advisor knows what Buyers look for both good and bad. A strong on-boarding process with an Advisor helps identify the elements that add value to a business in addition to those attributes that may create objections with a potential Buyer that need to be overcome.
Adding Business Owner Credibility
Engaging a quality Business Advisory Firm illustrates to all of the parties involved that there is a genuine commitment to successfully complete a transaction. Through the Advisory Firm’s professional representation there is an increased likelihood of a successful closing. Your Advisor’s job of adding credibility to the Seller comes through careful planning and combined with high quality materials and professional representation throughout the process. A Business Owner can greatly assist an Advisor by providing full disclosure which allows confident presentation of a business in the marketplace.
Transactions often involve various forms of consideration such as cash, equity, seller notes, earn outs, third party financing along with various other forms of contingent consideration. Highly trained and experienced Advisors can assist a Business Owner and potential Buyer with evaluating deal structures to address the needs and desires of both parties that often provide solutions to conflicting transaction objectives. A quality Advisor will help evaluate a business for the ability to attract SBA financing as one of the early steps in the planning process. A business that does not qualify for SBA financing can require increased seller financing and/or experience decreased market value – so it is important to evaluate and work towards becoming an SBA conforming business early on in the process.
A top-quality Business Advisor will typically take the lead in negotiating the terms of a sale. As such, it is important to engage a Business Advisor Firm that maintains a team of Trusted Advisors that possess excellent negotiation skills.
Excellent negotiators concern themselves not just with price. Terms & conditions, timing, process and other major considerations with a transaction are equally as important. An Advisor should be able to assist a Business Owner with identifying areas that are possible lightning rods that can impact negotiating position(s) in order to take actions that strengthen weaknesses and increase value in advance of going to market.