Everyday, I’m asked this question by business owners who are looking to sell their business. It’s good question. Why do you need to hire a business broker? The answer is simple – expertise.

As a business owner, you understand that you need to hire experts to handle certain aspects of your business to protect your investment and its continued success. That’s why you don’t think twice about hiring a CPA or an attorney. The principal is the same when hiring a business broker.

Typically, business owners hire a broker because:

• You have spent a great deal of time and energy building your business
• Your business may be your largest financial asset
• You are uncertain how to protect your confidentiality
• You have no real idea of what the business is worth
• You don’t know how to find and qualify buyers
• You may not have negotiating skills
• You don’t want to take your eyes off the business while it’s being sold
• You may not even be certain of what the first steps are to sell your business

Just like hiring a CPA or an attorney, you need to do your homework when hiring a business broker. A good broker is a skilled professional who will manage the sales process for you and handle all of the complications so you can continue to grow your business!

A member of the VR network which has been providing sell-side services since 1979, VR Huntington Business Group in Dallas has been recognized on numerous occasions as a leading firm amongst all professional intermediaries and business brokers in North Texas.

What you should know before hiring a Business Broker

Prior to engaging a broker let us first begin with the skills and qualifications that your broker should possess and how to determine if you are selecting the right broker to represent you.

Seller Due Diligence: A prospective buyer will undertake due diligence – so should you. Review the broker’s experience, credentials and references. Visit their office to be certain they are not operating from their home. Check the BBB. Have they handled sales of your type of business before? How long have they been serving your market?

Check IBBA: The International Business Brokers Association® (IBBA) is a non-profit trade association of business brokers that provides a professional certification process after a rigid education program is completed. Are the leading members of your brokers’ firm certified?

Use a Specialist: A business broker who spends all their time selling businesses, as opposed to real estate agents for example or part-time business brokers, will add more value to your sales transaction.

Confidentiality: Selling one’s business is a highly confidential matter. Your business broker should ensure all measures are in place to protect your company. Any knowledge by your suppliers, employees, or customers that you are selling can have adverse repercussions.

Marketing Plan: Selling your business is all about strategic marketing. Properly positioning the sale of your company to attract as many buyers as possible is the objective. A skilled broker will have a detailed marketing plan with advertising strategies designed to attract a wide range of prospective buyers.

No Upfront Fee: A business broker’s fee ranges from 10 to 15% commission of the sale price of your company. Avoid any broker asking you for an upfront fee.

What a Good Business Broker Will do for You

Qualified brokers will meet the standards outlined above and will, in addition, be able to provide the following to ensure that your objectives are fully satisfied:

Value your business using several different methods and give you an idea of the price your business is likely to sell for. good broker will adjust your financial statements and recalculate the cash flow since it could be higher than what was disclosed to the IRS

Add a layer of confidentiality to the transaction thereby protecting the value of your business and helping you get the best possible sale price for your business.

Reach more buyers through channels that you may not be able to access directly on your own.

Negotiate with buyers and their advisors to get you the best price and sale terms for business.

Educate you about the sales process – Many sellers are not aware of what they have to disclose in documents such as the Non-Disclosure Agreement or Purchase Agreement

Manage the due diligence process. Selling a business can be a long and tedious process. A good business broker will help you by answering many of the typical questions that buyers have allowing you to focus on the daily operation of your business.

Complete the deal. An experienced business broker can work with you to structure the financing of the sale and help close the deal.

Remember – A good broker will allow you to get you a lot more money at the best terms (even after you have deducted their fees).

Mike Derrick is a Senior Business Intermediary with VR Huntington Business Group Inc. a VR Business Sales firm in Dallas (www.vrbigd.com).

VR Huntington Business Group, located in the heart of the DFW Metroplex, serves the entire Dallas-Fort Worth Metro area as well as North Texas. The company specializes in Business Brokerage, Mergers & Acquisitions, Business Valuation and Consulting services focusing on small businesses and mid-market companies.

While there are a few good and strategic reasons for the owners of a C Corporation (“C Corp”) to maintain C Corp status (e.g., plans to take the company public, preserving health care deductions, etc.) the owners MUST prepare in advance and develop an Exit Strategy in order to avoid the shock that typically comes when they receive the tax bill following the sale of their company.

We at VR Huntington Business Group often find that business owners have very little knowledge of the tax consequences that are triggered when they sell their business. These consequences are most especially severe for the owners of C Corporations.

C Corporations pay taxes on the income earned and, if the earnings and cash levels warrant, they then distribute the after-tax earnings in the form of dividends to the shareholders who will in turn pay taxes on those dividends. This is known as “double-taxation” and is the subject of much frustration for many C Corporation owners.

When a C Corp is sold it will generally take the form of an asset sale as opposed to a stock sale, which means the buyer will purchase the assets of the corporation and the proceeds will go to the corporation. The corporation will then pay taxes on any profits from the sale. What remains is then distributed to the owners who will in turn be taxed a second time – the “double-taxation” I mentioned earlier. Tax rates vary according to earnings and capital gains rates but, of critical importance, if the C Corp owners are not careful they will pay double taxes on the sale of the company.

If owners of a C Corp are considering the sale of their company in the next few years, they should meet with professional advisors to begin developing an Exit Strategy. The owners’ CPA and a professional business intermediary should be contacted to start developing an exit strategy well in advance of the sale. For example, it may be desirable to make an S Corp election and take advantage of favorable tax strategies now available under the American Recovery and Reinvestment Act of 2009.

We, VR Huntington Business Group, have on numerous occasions advised our clients to consult with their CPA regarding how they can minimize their tax burden by classifying the sale as one that predominately includes personal goodwill. This structure may be applicable and can substantially reduce the taxes on the sale of a C Corp. In other cases the owners’ CPA or other advisors may be able to develop alternative tax strategies to substantially reduce the tax liability. There are, as noted above, advantages to C Corporations but when selling a C Corp the owners must plan carefully and well in advance.

In summary, VR has often been contacted by owners of C Corporations that it most cases should have considered converting to an S Corp many years earlier. These owners are now presented with significant hurdles that advance planning could have avoided. We find that many middle-market business owners, unfortunately, do not understand the effects that a C Corp status has, not only on the eventual price the owner will receive for the business and the taxes to be paid on the sale, but also on the challenges that a C Corp status presents in marketing the business.

Focus should be on advance planning – VR Huntington Business Group offers consultative services to ensure against the pitfalls that many C Corp business owners should avoid before selling their business.

Mike Derrick is a Senior Business Intermediary with VR Huntington Business Group Inc. a VR Business Sales firm in Dallas (www.vrbigd.com).

VR Huntington Business Group, located in the heart of the DFW Metroplex, serves the entire Dallas-Fort Worth Metro area as well as North Texas. The company specializes in Business Brokerage, Mergers & Acquisitions, Business Valuation and Consulting services focusing on small businesses and mid-market companies.

As I mentioned in previous post, there is more to selling a business than the sale price. Buyers can offer big numbers when they’re looking to buy a business BUT can they pay that price. Here’s how to make sure they can.

Put Like With Like

Look at your business and ask yourself, “What role do you fulfill?” Yes, I already know what your answer will be: “Everything!” But if YOU do everything then you have nothing to sell; you’d simply be irreplaceable, and not in a good way. What is the role, realistically speaking, that you fulfill in the business? Sales and marketing? Production? Logistics? Bookkeeping?

Specifically, what do you do that makes the company uniquely yours? Your job and that of the business broker/intermediary is to hire someone that can do this job not just as well as you did it but actually better than you.

This is not rocket science, but rather this is something that can be done very effectively 99% of the time. And guess what? You have help from the business brokerage firm, and you have a say as to who the buyer is; none of this process happens without your active participation.

How many investments can you say that about? I mean, it’s not like as a shareholder of Coca-Cola or Yahoo! you have a say about who the new CEO is of that publically traded company where you invested your retirement funds. Here you play an active role in planning for your retirement by screening the buyer applicants for your company. After all, the better screened the buyer; the more likely he or she will be to run your company successfully in your absence.

Resumes, References and Credit History

That is why it is important when you are qualifying the buyer that you ask for resumes, references and credit history. You need to make sure that you can understand what type of buyer I would suggest you lend money to.

Huntington Business Group Inc. in Dallas, the business brokerage firm that I own and operate, takes this point very seriously. In qualifying the buyer, you should have a resume in front of you to consult. This resume should include the work and experience that relates directly to the business that you own.

As I said in a previous post, when I sold my janitorial business, the buyer didn’t have janitorial experience but had extensive and relatable sales experience that, reading between the lines, I could see would apply directly to my company.

While considering the buyer, it is equally important for you to examine your business strengths, your weaknesses and the role you play. Once you leave the company, the business must be strong in operation (even without you) because of the employees that you have in place.

Obviously, the buyer doesn’t need to be strong in this area; the employees you entrust with your company should do their jobs and do them well, regardless of who signs their paychecks. The buyer should be strong in the areas that you fulfill, or the business needs to be able to grow and be more successful. In fact, what you are looking for in the buyer is someone that can take your business to the next level.

This is how you are going to get paid.

Forget what the business is currently doing; if the buyer is the right match, then two years from now, the company will be much larger and have much greater capacity to pay you the money you are owed and the interest that is mounting.

Another area when qualifying the buyer is credit history. If the buyer has relatable experiences, then you would look to their creditworthiness. Now, as a business transition specialist, I must say here that rarely do I see a buyer with bad credit. So what I really want you to focus on is not just the credit score. Take a look at credit history, and in particular look for what type of credit they have had previously and, if any, what type of problems you can see in their credit history.

Again, you are not alone in this process; it doesn’t have to be so hard. In my business, this is an area that we help you with. We will sit down with you as a “Credit Committee” to analyze the creditworthiness of an individual to buy your business. I bring this up because I have seen a buyer with a credit score of 700; but they had a red flag buried somewhere in there, a repossession of a car.

Now, as a broker where the seller has put his trust in me to sell his business to the right buyer, this is concerning to me. I want a complete explanation of what happened and how the issue was handled. If the buyer is the type that would allow their vehicle to be repossessed, then they may be the type of buyer that would walk away from your business when the times get tough.

In this particular situation, the buyer had a lemon car and was able to show the documentation of this and, upon request, a letter from the lender where they were correcting the issue on their credit report (even though it had not been done at the time we were reviewing). In the end, the buyer ended up being more than qualified to purchase the company and paid the seller note in full, giving the story a happy ending.

Without a quality brokerage firm in place checking on these things, the seller might have missed the repossession in the first place or seen it, misunderstood it and turned the buyer – and a good prospect – down out of a kneejerk reaction. Neither course is advisable.

Parting Words About the Buyer’s Experience to Run Your Business

At the end of the day, this process is all about getting paid. Finding a qualified buyer, making sure he or she is best suited to run your company and vetting the prospect through a series of verifiable processes just makes sense to ensure your investment – now and in the future.

Of equal importance is finding a buyer who is experienced enough to run your business in your absence, regardless of what line of work they succeeded in previously. Be it suitcase sales or the restaurant business, retail or manufacturing, if you find the buyer’s experience suitable for your company, you’ve found a qualified buyer indeed.

Scot Cockroft is the owner and president of Huntington Business Group Inc. a VR Business Sales firm in Dallas (www.vrbigd.com).

VR Huntington Business Group, located in the heart of the DFW Metroplex, serves the entire Dallas-Fort Worth Metro area as well as North Texas. The company specializes in Business Brokerage, Mergers & Acquisitions, Business Valuation and Consulting services focusing on small businesses and mid-market companies.

You’ve made the decision to buy a business. You’ve done your research and you’re ready to request more information. You click on the link to send an email or you make that call to the Business Broker and you anxiously wait for a return phone call or email. Then you wait and wait and wait but nothing – no response. You’re confused and frustrated as to why the Broker has ignored your inquiry.

Everyday we hear this complaint from Buyers – “I’ve inquired about several businesses but never got a response from anyone.” Ideally, the “average” Business Broker should respond to your request for more information about a business within 24 to 36 hours. If you are having difficulty receiving a response from the business broker, you are either dealing with an incompetent Broker or a one man office or it could be you, the buyer.

Unfortunately, I can’t help you if you’re dealing with a one man office or an incompetent Broker other than to say do not use the services of that Broker if they will not respond to you in a timely manner. That being said, Business Brokers are inundated with inquiries from Buyers concerning the businesses for sale that they represent. 9 out of 10 buyers will never buy a business, therefore Business Brokers must determine if you are one of the nine that will never buy a business or are you that one buyer that will buy the business and begin the adventure you have always dreamed of – owning your own business.

Here are some reasons as to why a Business Broker has not returned your call:

1. Inquires on multiple businesses at the same time

When a buyer’s initial contact with a broker includes interest in more than 2 listings it brings up a couple of concerns for the Business Broker. Their first concern is whether or not the buyer is really serious about buying a business or are they just “lookers” or “tire kickers“. Another concern for the broker – has the buyer thought through the buying process and determined what industry best fits their skill set. A good Business Broker can definitely help a buyer locate the right industry and business that best suits them, however, when submitting an inquiry to a Business Broker it is always best to start with one listing first. Remember, you can always mention to the broker that you’re interested in additional listings and would like more information.

2. Your first contact is a request for detailed financials

Buyers obviously need to see financials for any business they have interest in; however, it is not the first thing you should look at when you are researching a business. A business is more than just what you see on paper. You need to understand location, product, employees, niche etc. as part of the evaluation. Looking at the financials only is not a fair look at the overall business and you might possibly miss a great opportunity if you just focus on the financials. A Business Broker will typically have 3 years of financials for all of the businesses that are listed (there are some exceptions to the rule).

3. You require the physical address of the business

Most buyers in our experience desire a business located close to where they live so they want to know where the business is located. That is understandable, however, all businesses that are for sale are confidential which includes the location. The location of the business is a competitive advantage to the business. To maintain the integrity of the business before and after the sale, the actual address cannot be disclosed until after a non-disclosure agreement has been signed and sometimes not until you have met with the Business Broker to be sure the business is the correct match for you – the buyer.

4. You refuse to sign a Non-Disclosure Agreement

As a Business Broker we must fight against the perception that a business for sale is a negative occurrence. Employees, vendors, customers and competitors must not know that the business is for sale as the employees will become nervous and may start looking for other employment, customers will stop buying from the business and vendors could stop supplying the business. Should a competitor become aware that a business is for sale it could become a disadvantage to the business. This would cause irreparable damage to the current and future business. When a buyer refuses to sign a Non-Disclosure Agreement it creates concern with the Business Broker that the buyer might be a competitor or are they trying to steal proprietary information from the business.

5. You do not provide complete information

Along with the Non-Disclosure Agreement most Business Brokers also request additional information in the form of a Buyer Profile. The profile often requests your contact information as well as details about the industry you are interested in, the amount you are comfortable investing for a down payment and a little bit of background on your skill setetc. These questions are often tailored to the specific Business Broker that you are working with. The main thing to remember is that the more information you can provide the Business Broker the more likely they will consider you a serious buyer.

Business Brokers need a buyer who is able to complete a transaction, however, as I have already mentioned 9 out of 10 buyers will never buy a business. If you are serious about buying a business follow the suggestions above and Business Brokers will want to respond to you to your inquires and help you find that perfect business for you to start the entrepreneur adventure.

Mike Cockroft is a Senior Business Intermediary with VR Huntington Business Group Inc. a VR Business Sales firm in Dallas (www.vrbigd.com).

VR Huntington Business Group, located in the heart of the DFW Metroplex, serves the entire Dallas-Fort Worth Metro area as well as North Texas. The company specializes in Business Brokerage, Mergers & Acquisitions, Business Valuation and Consulting services focusing on small businesses and mid-market companies.

Finding the right buyer for your business is a critical step in selling your business – probably the most important.

The Vetting Process: Worth Its Weight in Gold

A good business broker (or intermediary) will vet-out the buyer in such a way that guarantees that you are dealing with a reputable individual or group that is purchasing your business.

Most buyers that have the type of money that we are talking about to purchase your business didn’t get that money by being an idiot. If they did, a quick Google search and a few reference calls will show this sooner than they can admit, “I’m not really qualified.”

Your broker will not just consider the financial equation (although that’s vitally important) but will also look at experience, reliability and the right “fit” for your company. For instance, does the buyer have relevant experience that will relate to your business? Maybe, maybe not; prior experience doesn’t always have to align perfectly.

Experience: (Also) Worth Its Weight in Gold

Case in point: the buyer that I sold my business to was a suitcase salesman. Yes, that’s right; he sold suitcases to department stores. You may say, “How does that guy have the right experience to sell janitorial services to multifamily housing complexes?”

Well, let’s stop seeing suitcases as apples and janitorial services as oranges and put like experience with like experience instead. After all, this wasn’t just any suitcase salesman. It just so happened, he was a top salesman of a very high-price, high-quality kind of luggage. Well, it just so happens our business was known for its “high-quality” image in the janitorial business. Now, instead of apples and oranges, suddenly you’ve got like with like.

He was also as experienced in dealing with executives over many location department stores as he was used to dealing with the local saleslady that couldn’t care less about what luggage to use; she just wanted to make sure that customers didn’t come storming back in to complain when the luggage was destroyed at the airport. Well, as you can see, his past experiences in luggage sales also made him perfect for the janitorial business.

My business needed someone with sales experience. I had a manager that was awesome at running operations, but he was terrible at getting new business. As it turned out, this new buyer couldn’t just go to individual apartment complexes and sell our high-priced janitorial services, but he could meet with the management companies that managed 30 and 40 complexes to convince them to let us into all the complexes.

Now, this was not that difficult for a good salesman. But the hard part was convincing the local manager that we were worth the extra cost and we would take care of their needs without their new tenants coming back to complain. Suitcases or janitorial services, soap or CDs, Mustangs or Maseratis, a good salesman isn’t good because of what he sells; he’s good because of how he sells.

Turns out, this buyer was perfect!

The Right Buyer Can Put Your Mind at Ease

Now that I sell businesses for a living, it amazes me how many perfect buyers we find for folks just like you every single week. Now, keep in mind, this is not a sales pitch – just an explanation of the benefits of working with a quality brokerage firm that wants the best for both the buyer and the seller. And trust me, putting two wrongs together in a deal never makes a right.

Another case in point: I was in a manufacturing plant the other day taking a tour with the seller and a prospective buyer. As we were walking around the production floor during a certain point in the tour, I pointed at an item that the business manufactured and asked the dumb question: “What is that?”

The seller picked it up and began to look at it slowly and then said, “I’m not really sure.” To that the buyer chuckled and said, “That’s a high-pressure water valve that is used in blah, blah, blah application…”

Believe me, it didn’t end with “blah, blah, blah” either. In fact, he told me more than I ever cared to know about that particular valve! The point is that, in this case, the buyer knew more than the seller about something that the seller’s business actually produced.

Now, how well do YOU think this buyer will do in the business?

Scot Cockroft is the owner and president of Huntington Business Group Inc. a VR Business Sales firm in Dallas (www.vrbigd.com). To learn more about Seller Financing and Finding the Right Buyer for Your Business, read Part 1: How Do I Know If A Business Purchaser Has The Experience to Run “My” Business

VR Huntington Business Group, located in the heart of the DFW Metroplex, serves the entire Dallas-Fort Worth Metro area as well as North Texas. The company specializes in Business Brokerage, Mergers & Acquisitions, Business Valuation and Consulting services focusing on small businesses and mid-market companies.

VR Huntington Business Group is active in the middle-market sector and defines this sector as being one comprised of companies with revenues between $10 million and $200 million.

There are many complexities surrounding an M&A transaction, but arguably the key component is the valuation. Attention should be directed to the value drivers of a company with a specific focus upon those drivers that can enhance value for the client company owners. While many professional intermediaries lack the consultative expertise to advance its clients interests, VR Huntington Business Group recognizes the benefit its clients derive from a broad offering of services. Our ability to identify value drivers and to effectively advise our clients will vastly expand the likelihood of a successful transaction.

We believe the following nine value drivers will enhance a valuation and strengthen a client’s company position while being marketed:

#1: The Customer Base

The customer base of the company being acquired is a primary focal point. What percentage of sales is generated by repeat customers? How many new customers have been acquired annually over the past few years? Is the customer base stable? Is there a concentration of customers and how will economic fluctuations and impact the customer base?

#2: Recurring Revenue

Recurring revenue from the customer base provides confidence to a buyer that the revenue streams can be sustained. What percentage of sales is recurring? Will the combination of revenues from the acquiring company and the acquired company create an opportunity for a higher recurring revenue percentage of the total when the deal is completed?

#3: Product Integration

A major reason for making an acquisition is to acquire a new and complementary product line so that the acquiring company can leverage its current distribution system and, therefore, increase revenues and gross margins.

#4: Gross Margin

This is often the most important line item on the P&L. A detailed analysis must be completed to determine whether an acquiring company can improve gross margins.

#5: Intellectual Property

Intellectual property includes trademarks, patents and copyrights, but it also can refer to a process such as a unique method to generate sales leads and close sales. Proprietary processes should be closely examined – these processes can add considerable value.

#6: Human Capital and Management Depth

Post-sale integration failures of the past are largely the result of management departing after the deal is closed. When valuing a company that is for sale a close look at the human capital of the organization is a necessity. Also, does the management team have substantial knowledge and can they add value to the new management team?

#7: General and Administrative Leverage

Almost as important as gross margin is the general and administrative leverage when combining the acquiring company and the company to be acquired. Careful planning is necessary in this area prior to the LOI stage since synergies carry value.

#8: Sales and Marketing Effectiveness

Another important element of a successful transaction is to determine whether the company has developed an effective sales and marketing model. How long has the model been in place and what are the historical results of the model? Is the model scalable through the forecasted period?

#9: Barriers to Competitive Entry/Competitive Differentiation

Barriers to competition are becoming more difficult to identify, as many companies are reluctant to file for patents even if a technology or process is evaluated to be “protectable.” Buyers seek effective barriers to competition when evaluating a potential acquisition through competitive differentiation.

Conclusion

In today’s tough M&A environment, the professional intermediary must analyze the numbers and make solid recommendations based on that analysis. It also is more important than ever to concentrate on these value drivers when advising middle-market clients on maximizing value during the transaction process.

Mike Derrick is a Senior Business Intermediary with VR Huntington Business Group Inc. a VR Business Sales firm in Dallas (www.vrbigd.com).

VR Huntington Business Group, located in the heart of the DFW Metroplex, serves the entire Dallas-Fort Worth Metro area as well as North Texas. The company specializes in Business Brokerage, Mergers & Acquisitions, Business Valuation and Consulting services focusing on small businesses and mid-market companies.

DALLAS, Tex. – CKS Transport, Inc., a FedEx Ground line haul contractor domiciled out of the Hutchins terminal near Dallas, was acquired by The Perham Group, Inc. of Arizona last week with the assistance of VR Huntington Business Group in Dallas.

Prior to acquiring this FedEx Ground operation in 2007, CKS president Colin St. Clair actually considered acquiring a different business with VR Huntington. Although he went a different direction with his decision, he always remembered the way VR Huntington Business Group presented businesses for sale and the way he was treated as a buyer. So it was only natural when it came time to sell CKS that he called VR.

“As a buyer, I met with several Dallas area business brokers looking for purchase opportunities,” he said. “Not one organization provided the level of professionalism, knowledge and access to data that VR Huntington did. As a seller, I wanted to make sure my business had those same advantages, so listing with VR was an easy decision.”

Bob Perham, president of The Perham Group, Inc., was actively searching for a suitable acquisition opportunity in the FedEx Ground system. He researched dozens of opportunities around the country, but in the end no available business fit his criteria as well or was presented as effectively to him as CKS.

“When I started researching FedEx listings to acquire, I discovered several that appeared to be what I might be looking for, but I was discouraged by the lack of response and information I was able to get on these operations, “ Perham said. “At the end of the day, VR Huntington was the one organization what was able to deliver the quality and depth of detail I needed to actually review the business and ultimately make an offer.”

VR Huntington not only assisted St. Clair in the marketing of his business and the qualifying of potential purchasers, but they were also deeply involved in every detail of the sales process – from negotiating the purchase price and the asset purchase agreement, to coordinating closing and funding, VR Huntington was critical to this transaction being a success.

“There’s no question that without VR Huntington and my agent that this transaction would have never closed,” St. Clair said. “There were several occasions where the deal stalled and I thought we might have hit a dead-end, but my agent never got frustrated – he was always there with a new solution, and ultimately that’s what helped make the difference.”

VR was established in 1979 and is the oldest professional business brokerage in the nation with more than 125 offices and 800 agents worldwide. VR Huntington Business Group (www.vrbigd.com) is based in Dallas and has finished the last four years as one of the top VR offices in the world. VR Huntington Business Group specializes in assisting the owners of privately-held companies to value, market and sell their businesses, as well as representing buyers interested in professional assistance in their business searches.

When you stop and consider all of the different factors that lead to the success of selling a business, no one single aspect is more important than the price. You have probably heard the old saying “you make your money in real estate when you buy.” Well, a similar statement can be made about successfully selling your business …

“The success of selling your business is determined when you price it.”

I believe there are three ways to price a business – unfortunately two of them are disastrous for the seller. Price the business too high, and buyers will steer away from the listing. Price the business too low, and you don’t get the full value you deserve. But if a value for your company can be generated using proven methods and applicable research, then the ultimate of goal of pricing the business fairly and correctly can be achieved.

So how do you generate this value? If I was guessing, I would say that you have probably heard of ways to value your business – from a CPA, another business owner or from a book or website. Although some of these “tips” may be relevant, a true professional opinion of value is the only way to give yourself the piece of mind that your business has been valued correctly.

The Huntington Professional Business Valuation is a tool that combines the most relevant valuation models used today, along with industry research and business analysis, to produce a fair market value for your company. We don’t just consider one valuation technique – we utilize several ways of looking at your business and evaluate which carry the most weight.

This valuation is an invaluable tool for all parties involved in a transaction – we are able to determine the marketability of your business, you are able to determine if this is the right time to sell based on understanding how your business is priced, and buyers enjoy the confidence of knowing the price they are considering has a substantial amount of research and analysis backing it up.

Don’t leave such an important aspect of selling your business to chance. When it comes to establishing your asking price, make sure you have the analysis and methodology behind the value to support it. In the end, this type of diligent attention paid to your valuation will pay off in a faster, smoother and less-frustrating transaction.

Jeremy Furtick is a Senior Business Intermediary with Huntington Business Group Inc. a VR Business Sales firm in Dallas (www.vrbigd.com).

VR Huntington Business Group, located in the heart of the DFW Metroplex, serves the entire Dallas-Fort Worth Metro area as well as North Texas. The company specializes in Business Brokerage, Mergers & Acquisitions, Business Valuation and Consulting services focusing on small businesses and mid-market companies.

I hear it said over and over, IF I am going to finance the sale of my business “How Do I Know if They Have the Experience to Run the Business?” This particular reason for not seller financing your business can be asked in a number of different ways but the message is virtually the same: how can I be sure I’ve found the right buyer for the right company at the right time?

One resounding way in which I hear this same complaint translated sounds a lot like, “I don’t know what ‘that’ guy is going to do to my company after the sale.” Well, again, this concern can certainly be mitigated by paying closer attention to how exactly you find the right buyer.

If you’re not being very discriminating during your screening process then, yes, I can agree with this statement (to a certain extent) – particularly if you are selling the company to “Joe Bob,” You know….Joe, the customer or employee who keeps making comments pertaining to the fact that he wishes he could own “a company like yours” one day.

But with an investment like this, you wouldn’t dare be so indiscriminate with your buyers, now would you?

Getting Paid Is More Important Than Selling Price

There are ways to make sure you find the right buyer for the right company at the right time. And the way we overcome this issue every time is by doing a good job when it comes to due diligence by scouting out the right buyer for your company “The RIGHT Company”. Candidly speaking, even if we are being mercenary, you are looking for much more than just the buyer that is the highest bidder for your business!

There is much more to selling a business than the total price; anyone can offer big numbers in an offer to purchase and, perhaps, even back them up (for a little while). The real brass ring for anyone seller financing their business is, of course, actually GETTING PAID! Not just getting paid today but tomorrow and through the term of the loan.

It doesn’t matter if you get $10 million for your $2 million business or $100 million for your $20 million company. If you will never get paid a dime of that money, what difference does the selling price make? (Well, besides the bragging rights while playing golf with your buddies or having coffee with friends, that is.)

At the end of the day, it’s all about getting paid. Therefore, you need to make sure that you are using a reputable intermediary or business brokerage professional to ensure that you have not only a qualified buyer but one who is committed to paying you throughout the term of the commitment.

You’ll need an intermediary or business brokerage firm, for instance, that is not just out for the one-time commission but is particular about the buyer that they attract and has a history of doing so successfully for his or her clientele – one that is discriminating about who they even talk to about your business.

Customer Relations Don’t End Once the Business Is Sold

Screening through a professional business brokerage firm or intermediary is essential to finding the right buyer at the right time for the right company and, what’s more, finding the right buyer, who will not only pay their bills but also succeed in running your company successfully (so they can continue to pay their bills).

It’s a little like being a millionaire matchmaker: you can’t just go out and find your client the prettiest, tallest, blondest girlfriend (even if that’s what he “thinks” he wants at the moment).

No, you’ve got to consider dozens of other variables, like how they’ll get along, what her interests are that he shares, how they’ll mature together, what they’ll talk about and will she love him…for him? Or just his money? You even want to screen her to see if she’ll treat the help well because, let’s face it, that’s an indication of how she’ll treat her husband (someday).

The same is true of finding you the right buyer for your company. You may think this is bad, but I have actually told buyers that they can’t even look at the business because they were rude to my staff. WHY? Because these are the types of buyers that will be rude to your employees and clients as well; these are the types of buyers that will burn bridges and bury your business.

You know the employee that is going to give you inside information? Well, it’s kind of hard to find out this information when that employee has stormed out because of this RUDE new BOSS who wasn’t screened properly by your professional intermediary. BUT you must make sure that the buyer is not a jerk…or an idiot.

I say this casually, of course, but it is no casual matter. If you want to get paid, you need to make sure that you’ve done your due diligence in finding the right buyer.

Scot Cockroft is the owner and President of Huntington Business Group Inc. a VR Business Sales firm in Dallas (www.vrbigd.com).

VR Huntington Business Group, located in the heart of the DFW Metroplex, serves the entire Dallas-Fort Worth Metro area as well as North Texas. The company specializes in Business Brokerage, Mergers & Acquisitions, Business Valuation and Consulting services focusing on small businesses and mid-market companies.

As a business owner, have you ever wondered whether or not you were doing the right thing by not reporting all of the revenue that your business is making? Not just from a legal or tax stand point but how it might actually effect the overall value of your business? Well, business brokers do think about it. In fact, as brokers we know that buyers will only pay for what can be proven. What does that mean to you as a business owner? It means that if you think you might sell your business in the future, the sale price will be a lot lower than you anticipated because of the reduced amount of documented revenue and profits from your business.

The question is how much lower will the sale price be as a result?

Here’s why this can be a problem

Jack is the owner of the “Good Books” company that is earning a little over $750,000 in annual revenue resulting in a cash flow slightly over $120,000. Remember, cash flow is the owner’s salary plus EBITDA or Earnings Before Interest, Taxes, Depreciation and Amortization.

John is the owner of the “Bad Books” company – the twin to “Good Books” – and is earning the exact same revenues and has the same expenses.

Both businesses have been performing about the same for the last four years that Jack and John have owned them.

Let’s assume that John has gotten bold over the years gradually taking $200 every week from the cash register in his first year; $400 a week the second year; $600 a week the third year; and $1,000 a week the fourth year.

So what exactly did John do and how did it affect his bottom line?

1. While taking some of “his” money out of the cash register, he also took the sales taxes that he had collected from his customers on behalf of the state;

2. He also has held back the percentage of gross sales that his insurance company charges for worker’s compensation coverage.

These two items would have been deductable; therefore, John’s taxable profits were reduced by something less than the amount that he took from the Cash Register. Let’s also assume that John pays 40% combined state and federal taxes on these profits.

John’s Doing

If you combine the capital that John took out of the sales tax account, the money he would have paid the insurance company and the taxes he “saved”; his “take” was $50,430. At first look, John is ahead of Jack by a little over $50,000 for the four years despite both having identical businesses primarily due to the taxes that he has been able to avoid so far.


What does John Lose When He Sells His Business?


When Jack sells his business, he receives a sale price at the midpoint of the recommended price range that is based on generally accepted business valuation methods. On the other hand, John receives a sale price that is about $67,000 less than Jack’s. The sale price is also at the midpoint of the price range for his business but because of the reduced cash flow, the business is valued less.


While John was able to “pocket” about $50,000 over a four-year period with risk, it resulted in a net loss of over $16,000 when he finally sold his business. This is not counting the potential future risk of an IRS audit that can come even after the business has been sold.


My simple point – it is better to report and pay taxes than to dip into the Cash Register no matter if you can get away with it because you will lose in the end when it comes time to sell your business. Keeping good books will keep you in the black and away from IRS scrutiny, no matter how tempting it is to take a little cash off the top. If you are planning to sale your business in the next few years….Report the correct numbers (you may pay a little more in taxes) and benefit at the closing table by the buyer. Yes, you are literally being reimbursed from the buyer for your “extra” taxes, PLUS put more $$$ in your pocket!