When an entrepreneur decides to sell a business, it’s usually a bad idea to jump into a sale without the help of a knowledgeable, experienced firm. A business owner can prepare for the sale process by retaining an experienced business broker, and, as long as that person is qualified for the job, the return on investment is often high for the seller. The difficulty of selling a business while trying to run it, and the disadvantages of going through the process and leaving empty-handed, are some of the biggest reasons to hire a knowledgeable advisory team like CGK. Read on to learn more about fees, the vetting process, and our role in business sales.
What fees can you expect?
An advisor typically sees their biggest payout when a deal is closed. Known as a success fee, this payout is often based on the transaction’s final price. Success fees are typically negotiated by the advisor and the business owner when the relationship is formalized. These fees usually depend on the business’s final sale price. Fees are usually standard in the industry. If the contract calls for a percentage of the sale price, the advisor is motivated to maximize the transaction’s value for the business owner. Along with success fees, many business brokers require upfront or monthly retainer fees, which assure the seller’s commitment to the process. At CGK Business Sales, we do not require upfront fees or monthly retainer fees. We believe that your success is our success. We are only paid when the business sells.
How do you choose the right partner for your business sale?
Business owners should carefully examine a potential advisor’s competence, experience, and reputation before signing a letter of engagement. Sellers should look for a positive history of past deals, advanced education and industry credentials, testimonials from past clients, and endorsements from other industry professionals. When advisors have worked in similar industries, they may be more acquainted with potential buyers. At CGK Business Sales, we have done deals in nearly every industry, usually multiple times.
What is the advisor’s role in preparing your company for sale?
A considerable amount of work goes into preparing the business’ marketing materials before a sales pitch is made, and adequate financial information is crucial. At CGK, we ensure that our clients have their financial statements adjusted and, if the company is large enough, a quality of earnings report ordered. We see to it that your company is properly valued before the process begins, helping clients understand how their balance sheets and income statements are connected to their cash flow statements. Beyond financial information, your CGK advisor also ensures that working capital and physical materials, such as inventory and property, plant, and equipment are all at proper levels. Getting an idea of supplier and customer concentration levels is another important task, as potential buyers will want some level of assurance that current customers will stay as the company changes hands. CGK leads you through this complex process step-by-step.
How does your advisor bring your company to market?
During this stage, CGK Business Sales puts the company on the market and chooses a method that maximizes the seller’s chances of success. In many cases, this involves contacting select, potential buyers ahead of time to gauge their interest. We also manage the process efficiently by qualifying buyers based on seriousness, expertise, and available capital. Depending on the business, we may also decide to show the business to a limited number of potential buyers at one time. No two companies are the same, and your CGK advisor tailors their approach to your needs.
How is the deal finalized?
Finally, you can feel confident knowing that your CGK advisor will help you negotiate terms, including the working capital included, escrows, asset allocation (if it is an asset deal), and other important issues. If contingent payments, non-compete clauses, or consulting contracts are needed, CGK will help you formalize these components as well. Call your nearest nearest CGK Business Sales team or contact us today.