When it comes to engaging a sale advisor, it is crucial that you are ready for that conversation or meeting. Most are very engaging, articulate and presentable so it is very easy to return satisfied and confident in their abilities. Only then to discover that you didn’t ask the most important questions.
The reality of the business sale process is that it is a very hard-nosed and demanding process. So, whilst relationships are important, due diligence must come first. So, if you have time, memorise or print these off:
What is the Sale Advisor’s Relevant Experience
- What is their reputation like? Can they give you at least three or four references from the last year of satisfied clients. Better still, do they have at least one example of a similar sized business they have successfully sold, or one operating in your sector.
- What is their performance like? Most talk a good game, but look for integrity and honesty. If they claim they sell more than 60% of businesses they list, then challenge them to prove it. If they sell lower than 30% then be careful, it may be painfully honest, but you need to reflect on that.
- How will they go about selling a company like yours? Ask them about their processes and the specific exit strategy they expect for your company. What will the successful sale look like, and what is the profile of buyers they are going to be pursuing?
- What is their online reputation like? It can be difficult to trust everything they tell you, but look online. Search for their brand name. Seek out business forums, even looking for mentions of their names – then ask private questions.
It’s why we created Firm Gains, as many of these answers are difficult to find so, whilst we cannot help you out specifically with full answers to all these questions, we can help you make wise decisions. Just give us a call on 0333 050 8225 for free, unbiased advice on how best to sell your company.
You Must Scrutinse the Contract
- What is your legal of commitment? What is the contract duration, what clauses continue past the contract, and what at the consequences at the end of the agreement? Read carefully what you are signing up for. Exclusivity is understood, but some have commission clauses stretching years into the future.
- What is your financial commitment? Work out what you will have to pay, what you will only pay based on success measures and what might be your overall exposure should a sale be agreed. Some brokers stagger payments based on agreed milestones, which is often a good way to ensure that progress is being made.
- What if it doesn’t work out? You don’t commit to this process not expecting to sell, but it is important that you think about difficult outcomes. You may receive offers much lower than the valuation, you may not sell at all, you may choose to withdraw from the process and appoint another advisor.
Never sign up without looking at the small print. If you’re not sure, show it to a lawyer. Contracts are negotiable so if you are concerned about up front payments, or success fee limits, then discuss it with the advisor and see if you can achieve a better result.
What Work is Your Business Sale Advisor Committing to?
- What will they be practically doing for you? The chat, croissants and coffee are nice, but what does the detail tell you about what they commit to doing for you. Will they prepare all your marketing materials including an Information Memorandum? Will they prepare a detailed business plan with projections? Will they attend meetings with potential acquirer?
- Have they really understood you as a client? What kinds of activities they will be engaging in to sell? How frequently they will meet with you? Will they go to meetings with you? What is their undertaking to support you in the process?
- What price do they think you will sell at? Most brokers will value businesses for you, but this is an area where optimism reigns and sadly it is rare that any broker achieves the target price or above. Again look for thoroughness in their approach. If they’re picking a number out of the sky, or have not asked you some serious questions about income, profit, contracts and customers, then be wary. The valuation should stand up to scrutiny, so seek a second opinion.
As you can see, we’ve managed to cram many more questions into this article than the ten suggested, but they’re all important and worthy of consideration. If you can get satisfactory answers to these questions from a sale advisor, transfer agent or broker, then you’re on the way to making a smart informed decision.
And, for help throughout the process from start to finish, come back to Firm Gains for more advice, guidance and help in making sure you achieve the best possible result. It’s quite a journey.