Blog


How To Select A Business Broker To Sell Your Business

Julian Solomons, a Southern California business broker offers his advice on choosing a broker to sell your manufacturing business

 

How Do I Select A Business Broker To Sell My Complex Manufacturing Business

 

Not all Brokers are created equal!  Some are very capable of selling a liquor store or small market, but when it comes to a complex manufacturing business, you need a different animal.

 

You need a Broker that has preferably had his own manufacturing experience and therefore has encountered the issues that you have to manage on a daily basis – employees – vendor delays – customer demands, marketing, cash flow, just to name a few.

 

Every industry group has its unique features – in aerospace, terms such as “Tier 1”,  “LTA” (Long Term Agreement) for example can affect the value of the enterprise.  You need a Broker that understands all the unique features of the business and can “tell the story” to buyers in a meaningful manner.  Only Brokers with this type of experience can extract the value you need for your years of hard work.

 

So, meet with at least two or three brokers that you have selected after carefully viewing their profiles and perhaps their own individual websites.  Ask them about the types of companies they have sold in the past, and the value of their average transactions.  When you give them a tour of your facility, take special note of the questions they may or may not ask.  These questions and their reaction to your answers should give you an idea of their breadth of knowledge, and how it will relate to your situation.

 

Finally, you need a Broker that is responsive to your needs; a Broker who will work tirelessly and efficiently through all the steps of the process.  Listing and obtaining an offer for the business is perhaps 25% to 30% of the transaction.  The most complex work is getting the deal from agreed offer to final close.  It requires unique skills that encompass knowledge of accounting, the law, negotiation, “hand holding” and usually a sense of humor!  Choose your Broker wisely and your transaction will be in good hands.



3 Tips To Get The Best Price When You Sell Your Business

1. Create recurring revenueIf there is a single mantra that Warrillow comes back to, it's this alliterative phrase. Recurring revenue is predictable revenue that can be expected to continue in the future. "For your business to be able to operate without you, it helps to create some subscription-based, annuity-based recurring revenue so you're not relying on your personal salesmanship to sell your products and services," says Warrillow. There are different kinds of recurring revenue--some, like auto renewal subscriptions and hard contracts, are more valuable than others. But ensuring you have some form of it will help you glean a better sale price. 

2. Find a strategic buyer. There are two kinds of buyers: financial buyers (who are buying your future profit streams) and strategic buyers (who are really buying your business to improve the performance of their business). Hands down, strategic buyers will offer you the highest possible value for your company. "Maybe they have a sales team who could fit your product into their bag nicely," says Warrillow. "Or geographic reach worldwide, whereas you've been focused on a very small market. Regardless, the strategic buyer is going to have things that they can monetize that the financial buyer won't.

3. Do your homework. There are a couple basic, preparatory things that any business seller should focus on. "When you leave the business," says Warrillow, "the business needs to continue on. That's the first thing to tackle: Create a company that can succeed without you. The business' management is also crucial. "Obviously, you're a huge inspiration for the company," says Warrillow. "You built it from scratch. But at some point you've got get other people involved so you can tell a buyer that there are other people running your company. They'll plan to stay even if you don't."

Follow these three steps and you'll improve your chances of getting the highest possible value for your company.

© 2017 Solomons Strategic Advisors