When the time arrives to sell your business, you don’t want someone representing you as broker or intermediary who is going to agree with everything you say. You need to make your decisions based on market-driven facts and a reliable source.
Many, many times, a business broker or intermediary will agree with a seller on what an asking price should be, just to get the engagement. This is a real disservice to the seller. Many a seller will base the price of a business on advice from the seller’s CPA, family and friends who provide input on an asking price range before engaging a professional broker/intermediary. The challenge in relying on this source of information as the basis for establishing a price is that this group of well-meaning people typically has no training or experience in the field, so they’re the blind leading the blind.
In any sales process, it is advisable to go to market with a price on high side, but in a range. It important to control expectations of what is reasonable without being delusional. When a broker/intermediary does not do their job of educating and helping the seller understand what is real, it wastes everyone’s time, and allows what were good, qualified potential buyers move on past your opportunity.
There are many considerations in establishing an asking price, with many moving parts. All factors need to be considered, including whether the transaction will meet a bank’s debt coverage ratio requirements so the seller can get all cash at the closing. Other considerations include the sales and net profit trend, concentration of customers, a typical period-ending A/R aging, terms of the business premises lease, accuracy and quality of accounting records, whether the seller is the face of the business, special trade licenses required, and replacement of multiple active owners in the business at FMV, to name some of the considerations.
As you choose a broker/Intermediary to represent you, it is important to consider the difference between being represented by a licensed agent or a licensed broker. The difference in having a broker represent you is training and experience.
If you would like a confidential conversation about how to prepare your business to be sold, feel free to contact me at 888-893-6661 or firstname.lastname@example.org. My LinkedIn profile is: http://www.linkedin.com/in/dolansales.