Beware the Adviser Swarm: Being Prepared to Sell Your Business

Over the past few months, you’ve finally started to selectively voice what you’ve been thinking about for over a year. It’s time to sell your business. First, you mentioned it to your buddies at the golf club. Next, you called a friend or two from the past who you seem to recall know something about selling businesses. You also started to talk about the prospect with your CPA and financial adviser. Despite only speaking to this select group, suddenly you are starting to think that you’ve unleashed Hydra, the nine-headed monster from Greek mythology on your business. Within weeks you’re getting a lot of offers to “help”.

In business speak, the sale of your company is known as a “liquidity event”. A liquidity event is a moment when a lot of money (liquidity) changes hands. And when money is changing hands, it tends to attract a swarm of professionals offering their expertise.

This is not “per se” a bad thing. Selling your business is a highly specialized discipline and there are many professionals who know how to successfully facilitate different aspects of this complex process. Having the right team in place will enable you to move on to your next act with a sense of peace, knowing you achieved the best result out of the sale of your business while staying true to your values.

On the other hand, the professional adviser swarm is not necessarily a good thing. Your interests may or may not be aligned with your advisers’ incentives, so it’s important to remain alert at all times. And remember, it’s your business after all that’s making this liquidity event possible!

When creating your business exit plan, who might be a necessary part of this adviser swarm?

4 Most Common Transaction Advisers

There are innumerable advisers that could emerge related to your impending business sale. We will briefly touch on the 4 most common advisers involved in the sale (and immediate post-sale) of a privately held business:

First, you have investment bankers (sometimes called business brokers for small business sales). These are the professionals who specialize in the marketing and sale of businesses. They usually collect a retainer, but earn the bulk of their compensation in a transaction success fee (% of purchase price) paid out of the closing proceeds of a sale.

Second, you have transaction attorneys. These professionals specialize in documenting and negotiating the many specific terms of business sale transactions. They also serve as trusted advisers to their clients, bringing their wealth of experience to the process. As in other areas of corporate law, transaction attorneys bill hourly.

Next, you have accounting and tax advisers. These professionals can analyze things like after-tax proceeds (i.e. how much you’re left with after paying the IRS) and also help think about how different negotiated transaction structures will impact your proceeds. Accountants may also be required to conduct a financial statement audit or review, depending upon the situation. Lastly, these advisers also offer a service known as a Quality of Earnings (QoE) analysis, which is commonly procured by selling businesses in the current transaction environment. The QoE report provides support to the company’s financial statements and is shared with potential buyers. Similar to attorneys, you will typically pay hourly for accounting and tax services.

The last one we will mention here are wealth managers (i.e. financial advisers). These professionals manage your personal wealth. Payment structures can vary, but the most common form is a % of your account value billed periodically.

Recommended Read: Selling Your Business in the Next 5 Years? Consider These 3 Tips For A Successful Exit.

Getting the Swarm to Work for You

All of these advisers, well managed, are absolutely necessary to a successful sale and post-sale process. That said, transaction professionals tend to get swept up in the whirlwind of the deal. The key is to guide and align your advisers to ensure that the work is being done in you and your company’s best interest. Oftentimes a maestro is needed to manage the process. Doescher Group has successfully represented several businesses through this critical period of time through its Transactional CTO offering. Learn more about Transactional CTOs here.

Selling can be daunting.
Are you prepared for the sale of your business?
Reach out to Doescher Group to find out.