Selling your business might be one of the biggest financial decisions of your life. You are running a business and certainly do not have the time to manage the sale as well, and you want to maintain confidentiality throughout the process. You know your business, but you don’t know the business sales process. So where do you turn for help?
You could ask your real estate broker, but they mostly specialize in non-confidential real property sales, not in the sale and transfer of fixtures, equipment, and goodwill. Your attorney or CPA certainly understands the law and the numbers involved, and will be an important part of your sale, but who will be responsible for valuing, marketing, advertising, dealing with the buyers, working through personality conflicts, and making sure the entire team is focused on the end goal? That is the role of the Business Broker, Business Intermediary, or M&A Advisor.
Business Brokers are generally not attorneys, but they need to know about contracts, leases, non-competes, confidentiality agreements, promissory notes, and earn-outs. Business Brokers are generally not CPAs, but they need to know about sales tax due on the fixtures and equipment portion of your sale, how the allocation of the purchase price impacts if you are taxed as ordinary income or get capital gains treatment, and the difference between the sale of stock and the sale of assets. Business Brokers are generally not psychologists, but they need interpersonal skills to keep the buyer, seller, and other advisors focused on the end goal. And business brokers need to handle the conflict that always arises during a sale without killing the deal.
So, you need a Business Broker, but which Business Broker do you choose? Of course, experience matters in life, and selling your business is no exception. Choosing a Business Broker who has personally done 5 or more deals in a similar size range is probably a very good idea. And make sure it was your broker who did the deals, not their office, not their network; they were the lead advisor on the deal. And, like the accountant who took the time to obtain their CPA designation, look for a Business Broker who cares enough about their profession to work toward earning a professional designation. Of course, be careful of made-up designations or certifications issued by private companies. In California, the California Association of Business Brokers grants the Certified Business Broker (CBB) designation, the state’s top designation. CBB brokers have completed educational courses, passed a comprehensive proctored test, and demonstrated to their peers that they have successfully closed a meaningful number of business sale transactions. The other designation worth considering is issued by the International Business Brokers Association. The Certified Business Intermediary (CBI) designation is like the CBB but has a national scope.
Business Brokers are like the conductor of an orchestra. They have a job to do, but they also make sure that the other important pieces contribute to the overall goal in a timely and meaningful way. But just as important as the professional designations and experience is your ability to communicate with the Business Broker. You and the Business Broker will be working very closely together, so it’s very important that you completely trust them and communicate effectively with them.
VRG has sold over 850 businesses, ranging in size from $100k to $30MM. They are members of the California Association of Business Brokers and the International Business Brokers Association and have earned the CBB and CBI designations.
