considered attractive to investors and bankers.
Your accountant may also be able to help you with money-raising efforts. At first, you might think this is because they know bankers. Yes, they do. But that’s not their only in with money. An accountant can sometimes help with raising money through contacts with other clients as well. But don’t expect them to promote this service. If they like the deal, let them offer it to you.
Your accountant will analyze the company’s financials to develop an accurate picture of cash flow, expenses, revenues, profits, liabilities and assets. He or she can also assist you with future projections to show to investors and bankers. Everything from budgets to cash flow reports will be prepared by your accountant. They will also help you determine the accuracy of financial statements.
As a buyer, you are best served by bringing in your accountant to help you with strategy before you even begin to search for a business to purchase. The advance planning and financial strategies they can offer may save you from some initial missteps. As with an attorney, remember that your accountant is there to give you accurate information, to give you advice and help with strategy, but the decisions are yours to make.
Business Broker
Business brokers (also referred to as business intermediaries, or mergers and acquisitions specialists) act in the same way that real estate brokers do – as intermediaries between buyers and sellers. They have listings from numerous sellers and can search out the right business for a buyer, often working with other brokers and going through their listings as well. They may be retained by either buyer or seller (though it is usually by the seller) and are particularly useful for buyers looking for a business outside the industry with which they are familiar. Keep in mind that there are few or no requirements for business brokers. In many states anyone can become one with no experience or education. For this reason, it is very important for the buyer or seller to do some research. Referrals from lawyers, accountants or bankers are a good place to start when searching for a good business broker.
For a seller, the primary benefit of using a broker is confidentiality. The broker can field calls and deal with prospective buyers for you, thus keeping your plans for a sale away from customers, suppliers and employees. He or she can prescreen potential buyers to be sure of their level of interest as well as their ability to pay, thus saving you the hassle of dealing with looky-loos and possibly even competitors. An experienced broker can advise you how much you might be able to receive for your company and can help structure the deal in a way that minimizes your risk should the deal fall through.
A business broker charges anywhere from 5 percent to 15 percent of the selling price, payable once the deal is done. For this reason, beware of a broker who is pushing for a close before both sides are comfortable doing so. It is not unheard of for an unscrupulous broker to push individuals to buy a business, any business, just so he or she can get the commission. It is also not unheard of for a broker to aid the seller in pumping up the sale price in order to pump up his or her own commission. So be keenly aware of what it is that gives the broker an incentive, and then stick to a strategy that is best for you.
The commission is usually paid by the seller. Sellers should try to structure the agreement so that they pay a portion at the close and the rest as the balance is paid. The seller should want the broker to take a risk on non-payment by the buyer as well.
Some things to consider when looking for a broker are:
• how long he or she has been in business
• what, if any, continuing education courses the broker has passed
• whether or not he or she has ever owned a business
• how many deals similar to yours he or she has brokered
• whether or not he or she (or the firm) belongs to a national broker organization (such as the International Business Brokers Association or the Institute of Certified Business Counselors)
Be sure to get references and follow through by calling them. It’s also a good idea to ask each reference if they know others who have worked with the broker. Don’t leave without fully understanding what the broker will do for you and then get it in writing.
Good brokers will not only ask how much a buyer has to spend, but also about professional and personal interests, as well as family and work obligations. This helps them determine what kind of business might work best for the buyer. If they show no interest in your personal life and other outside influences, consider finding a more thorough broker.
Some brokers want to do your negotiating, some don’t. Regardless of what the broker wants, it is your decision on how to handle the transaction. You need to communicate your wishes clearly.
Nevertheless, buyers should consider accepting any help a broker can provide. A good one can give you information on the company’s industry, market, management and customers. There is no guarantee as to the accuracy of this information, but it will be a good starting point for your own investigation. Have the broker cite his or her sources so you can go back and check the information. This will be much quicker than initially researching it yourself.
If you are a real hands-on type of person, a broker may not be for you. Brokers tend to worry about being cut out of the deal and left without a commission. Many are reluctant, at best (unwilling, at worst), to let buyers meet directly with the owner of the business, especially in the early stages of the deal. Most brokers will require sellers to sign an exclusivity agreement that says no one else has the right to sell the business during the time period spelled out in the agreement (usually at least three months). If the buyer or seller violates the agreement and/or decides not to complete the transaction, they will still have to pay that broker a commission. However, sellers can and should consider structuring the agreement so that they don’t pay a commission should they sell a business to someone they find on their own.
Other Professionals
Most small business owners will use additional professionals at one time or another. These professionals may include insurance brokers, marketing consultants, advertising and public relations experts, real estate brokers and architects/designers/contractors.
Insurance brokers help to make sure a business is neither under- nor over-insured. Either case can be from significant to devastating for an entrepreneur. Be sure you are using a broker, not a salesperson, and one who is an expert at business-related policies and experienced in insuring a variety of businesses. The insurance broker can check out the business plan and know what sorts of insurance you will need, as well as how much. In some cases involving larger businesses, you will want to use a risk management consultant to analyze the risks associated with the business and suggest the appropriate level of coverage for each risk.
From worker’s compensation to disability, life to fire and on and on, business insurance needs can be staggering. Don’t try to figure it out on your own. You don’t want to find out you are inadequately covered in the middle of a crisis. Nor do you want to be paying premiums for coverage you don’t need.
Marketing consultants can help research market potential for a target business and can be useful if your own search has only made you more uncertain. Of course, you will want to be sure that the consultant has experience in the industry into which you are considering moving.
Advertising and public relations experts are valuable for the transition and the early stages of your new business venture. First impressions, you know. Make sure yours is a good one. Remember that a sale of a business is a newsworthy event for which a public relations expert may be useful.
