Often selling a business comes down to storytelling. The buyer and seller are the main characters of the story that is being told. The seller is the one relaying the story, and the ideal buyer is the one who truly sees the future opportunity. 

A Brokerage Professional Can Help Tell Your Story

The simple fact of the matter is that often even sellers don’t know what the true story of their business actually is. They tend to lack the proper perspective as they are too deeply involved. Sellers may be burnt out or have never really thought through the story of their business in the first place. 

Business brokers and M&A advisors serve a great function as a third party who can look at the story from a different perspective. These professionals are numbers people, but it goes beyond that, as they can clearly see your business as a story to be told. And they can help you control that storyline for optimal results. 

Embracing the Human Element

In order to tell the story of the business and why a buyer should want to buy it, it is necessary for your business broker or M&A advisor to truly understand your business. This is why good communication is so important. After the interview process, these professionals must precisely arrange all the relevant information in such a way that the buyer can digest it and see the potential within the business. Through that means, a prospective buyer can understand that value and envision him or herself as the hero.

It Goes Beyond the Financials

Business brokers and M&A advisors also help sellers determine the price and work as advisors on pricing. The story of the business does start with the financials and the facts. But this is only the beginning of the process. Brokerage professionals will want to interview you to learn how to weave together your story. 

In the end, every story has a moral. It is important to pull all of these elements together to make an engaging story that will ultimately inspire and motivate a buyer to buy the business.

Storytelling Leads to Successful Deals 

When buyers open their minds to the story being told, they are able to envision the future potential of the business and why it is going to be a valuable opportunity.  At the end of the day, selling a business isn’t strictly about numbers, figures, facts, profit and loss margins, and other financial variables. Instead, it is also about the people. 

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Many business owners are truly committed to their businesses. As a result, it is very difficult for them to step away even when they approach retirement age. It is not uncommon for business owners to keep working into their golden years. But the truth of the matter is that at some point almost everyone will need to embrace retirement whether it is for health issues, moving to a new location, or simply for greater peace of mind.

If you see this path approaching for you in the near future, it could feel overwhelming. After all, most people have not sold a business before. As a result, they feel unclear about the process and don’t know where to start. However, everyone should be thinking about the eventual sale of their business because this future event should determine many of your current activities and decisions. 

Let’s take a look at some things you can do well in advance to ensure that an eventual sale of your business goes as smoothly as possible. 

Automate Processes

When prospective buyers look at your business, they will want to be able to easily envision it operating smoothly without you involved. Because a good portion of business owners are so integral to the functioning of their businesses, it can be difficult for them to figure out how to decouple themselves from operations. In some cases, this process can take years. 

Now is a good time to consider this issue and what you can do to make sure your business can function without you one day. Give some thought to who at your organization could be a second in command. When a buyer sees that a competent and knowledgeable employee will be staying on to assist them, it can go a long way in allaying any concerns. 

Put Yourself in the Buyer’s Shoes

Imagine you were buying your business. What kinds of issues might be of concern to you? Chances are these will be the same issues that could concern potential buyers. Once you have identified any spots of weakness, you can start to zero in on figuring out how to handle them.

First and foremost, you will want your buyer to feel confident that there will be a smooth transition and that they can almost immediately begin to profit from their purchase of your business. Anything that you can do to help ensure that is true will benefit the sales process. 

Business brokers and M&A advisors are experts in the world of buying and selling businesses. They will help you to properly evaluate your business and look for these areas of weakness. Through this means when you do decide it is time to retire, the process will go more quickly and seamlessly. 

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When you are looking to sell, always focus on the positive aspects of your business. Many business owners fail to properly make a case for the benefits of their businesses to prospective buyers.  Be sure to make it clear that your business has stability and ample financial health. Let’s take a closer look. 

1. Prepare in Advance 

Preparing paperwork in advance will help to make sure that everything is in proper order and you’re not scrambling at the last moment. When your records are organized and correct, your prospective buyer will be able to truly see the value of your business. Buyers will also like to know that you have robust accounting processes that they can rely on in the future. 

You should also make sure that inventory is in stock and that any necessary upkeep has been done. All of these updates are part of the big picture when it comes to presenting your business in the best light to buyers. 

2. Reveal Your Methods of Operations 

You’ll also want to demonstrate that you have a solid formula for a successful business. Buyers love to see items in place like procedures manuals, as they reveal the routine tasks necessary to run the business. Anything you can provide that will help the buyer understand how to successfully run your business will help them understand its advantages. 

3. Keep Things Consistent

During the sales process, you’ll want to be sure to maintain regular operations. If prospective buyers see any kind of dip in success, this could negatively impact your deal. Selling a business is an all-encompassing process, and it can be next to impossible to handle all the associated tasks while still putting all the necessary time and energy into your business. 

Additionally, you will want to absolutely make sure confidentiality is maintained. A breach of confidentiality, whether to employees or to competitors, can quickly sabotage your deal. There are countless instances where a deal fell through due to a breach in confidentiality. 

4. Get an Outside Perspective

What is the best possible light for your business? Since you’re involved in the day to day running of the business, it is hard to have an outside perspective. Plus having never sold a business before, it can be hard to know what buyers will respond positively to. That is a great reason to work with a business broker or M&A advisor. They have years of experience knowing what attracts and deters buyers. They will help you to emphasize your strengths and minimize your weaknesses. 

While emphasizing the positives, you will of course want to be sure to be transparent about issues affecting your business. Otherwise, the lack of knowledge can come back to haunt you. When it comes to negative factors, your business broker or M&A advisor will work to help buyers to understand how some of these can be turned into positives once they take over the business. Or they can assist you to fix some of those weaknesses before putting your business on the market. 

5. Price Your Business Correctly

It should come as no surprise that if the price you set on your business is too high, you will lose interest from prospective buyers. That is another advantage to working with business brokers or M&A advisors. They will assist you to assign a fair market value to your buyers. When the price is optimal, the strengths of your business will stand out more. While it’s essential not to undervalue your business, you also want to make sure that you don’t overvalue it either. The good news is that brokerage professionals have experience and expertise at listing the optimal price. 

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No one ever said selling a business was predictable. However, the truth of the matter is that every sale is different. Even the reasons behind a business owner deciding to sell his or her business vary tremendously. If you are getting ready to sell, it’s important to be aware of the various aspects that could catch you off-guard. If you are prepared for the unexpected, you’ll be mentally ready for the sales process, which often does not go as planned. Even the smoothest and most streamlined sales encounter a few road bumps along the way. 

Price Considerations

When it comes to the price structure for a potential sale, many business owners have numbers in their minds that do not meet with reality. As a result, a potential offer could be far less than what they expected, and this causes conflict and delays. Your brokerage professional will prepare you with a thorough valuation so you can have a clear idea of the fair market price of your business. Be sure to ask any questions that you might have so that you feel fully informed when it comes to prices.

Confidentiality 

Throughout the sales process, confidentiality must be carefully guarded. Otherwise, this too can interfere with a sale. Your business broker or M&A advisor will have effective strategies to help maintain the highest levels of confidentiality. Even with the best safeguards in place, there is a small chance that a rumor could begin to circulate and word could get out to your employees, customers or supplies. In the case of this incident, it’s important to have a contingency plan in place to quell the rumors. 

Your Stockholders

Oftentimes, business owners of privately owned companies forget that their minority stockholders have rights too. You will not be able to sell your business without dealing with all parties involved. When you get a “fairness opinion,” it can go a long way to convince your shareholders of the best price and terms. Even if your shareholders are members of your family, they will have to be successfully dealt with before the sale goes through. 

Expect to Allocate Time

You may have hired an experienced business broker or M&A advisor, but you should still be prepared to spend some time dealing with the sale of your business. You’ll be expected to do everything from prepare documents to meet with prospective buyers. This fact that selling will take up your time is particularly true if you haven’t begun making preparations years in advance. That’s why we advise clients to start working with us early on.

You’ll want to make sure that despite your need to focus on elements pertaining to the sale of your business, it is necessary to keep your business running smoothly. Otherwise, any signs of weakness could interfere with your potential sale and your efforts could backfire. This issue just stresses the importance of preparing to sell years in advance. 

Through the sales process you must still run your company as well as ever. You’ll want to make sure things are progressing nicely, even if you don’t plan to own the company in the near future. Obviously, your buyer will want things to look reliable and any dips can trigger a red flag. 

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When it’s time to sell a business, you will want to keep confidentiality first and foremost in your mind. The reality is that many deals do not succeed when confidentiality is breached and others learn that your business is for sale. Let’s take a look at why this is the case.

What Can Occur When Confidentiality is Compromised?

If vendors or suppliers find out that your company is for sale, it can negatively impact your business in different ways. One common occurrence is that vendors begin to change the terms they have established with you. Even a small change might end up not being minor at all, as it could impact cash flow. The same can be said for word of your business being for sale reaching your creditors, as they could also suddenly change their terms. 

Another major issue that could be caused when confidentiality is breached is that your employees and customers might begin to worry. Employees could even start looking for new jobs. Your customers might worry about the new ownership and preemptively stop patronizing your business.

It goes without saying that you won’t want your competitors knowing that you are selling your business. This might make them more aggressive, and they could even start using this knowledge to take your customers. 

On some occasions, business owners set out to sell their business on their own. Unfortunately, this decision can put them at higher risk for confidentiality breaches to occur, which start to cause things to go wrong. When you are in the process of selling your business, you will want everything to appear as steady and reliable as possible.

Keeping Up Appearances

When a buyer is carefully vetting your business for a potential acquisition, you won’t want anything showing up on the radar that could give them pause. It’s important to show that the business is continuing to operate in a successful manner and there have been no recent changes. 

The good news is that business brokers and M&A advisors have proven strategies that will keep the news that your business is for sale confidential. Your brokerage professional will be sure to vet all prospective buyers, and they will use the most reliable confidentiality agreements that will protect your best interests. 

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Are you thinking of transferring your business to a family member? This occurrence is fairly common, especially among small businesses. Here are some considerations that will help with your planning and decision making.

Do You Have a Good Contract?

Sometimes close family members are tempted to skip a contract, but it’s always a mistake not to have things in writing. When you create a buy-sell agreement, it helps keep things clear between the parties involved. Make sure that your documentation is thorough. It should cover a wide variety of details including the amount being paid, your continued involvement, and the business value. 

Does Your Family Member Need Financing?

When it comes to selling businesses to family members, seller financing is common. You could even consider agreeing to a private annuity. This will allow payments to be spread out over many years.  One benefit to providing financing assistance is that you will receive a steady stream of income along with interest on the loan as well. 

You could also consider a self-cancelling clause on your installment note. This would allow debt to attach to your will in case of your untimely passing before the payments were complete. 

Are You Selling or Gifting Your Business?

Gifting a business takes place more often than you might think, due to the tax benefits involved. Also, when you gift a business, you can still maintain some level of control. 

The federal gift tax exemption changes every year. In 2022, the annual gift tax exclusion is $16,000. The lifetime gift exemption limit is $12 million. While you may owe some federal gift taxes if the amounts exceed the exemption limits, the good news is that after you have transferred your business, any future growth of the business won’t affect your financials. 

Is Everything Accurate?

Unfortunately, many business owners have acted unethically when it comes to transferring their business to their family members. As a result, the IRS tends to give this kind of transaction extra scrutiny. You will want to ensure that all your paperwork is in proper order and highly accurate. 

You may very well want to hire the services of a lawyer and accountant to assist you with this matter. Of course, a business broker or M&A advisor will also help you with the details of this agreement and figuring out what benefits you and your family members.

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When it comes to selling a business, there is more to it than just relaying the facts. It’s also important to emphasize the story behind the business. Business brokers and M&A advisors are also storytellers, as they must convey to buyers the story behind the business and how it can ultimately be transformed. 

It is through storytelling that humans organize the information they have about the world. In short, storytelling is an exceptional way to learn lessons in life and a great way to frame information about a business to sellers. 

Telling Your Story

Everything begins with the financials, in short, the facts of the business. When a business broker or M&A advisor begins working with a seller, he or she will look to gather those details. Once that information has been gathered, it is possible to begin to create a story. That story can be presented in many ways, including through a confidential business review or confidential information memorandum.

While many, if not most, buyers and sellers may think that when it comes to business, they are cold and methodical like a reptile on the hunt, the truth is more complex. Human emotion always comes into play. It is no accident that well-crafted stories, with their power to motivate and guide, play a role in the art of buying and selling businesses.

Decisions are Guided by Emotion

If we want to make the best decisions, it is important to consider the role of emotions in our decision-making. “In order to have anything like a complete theory of human rationality, we have to understand what role emotion plays in it,” said scientist Herbert Simon who is an American Nobel Laureate. ^[1]

Good stories grab the imagination and enable people to expand their definition of what is and is not possible. When buyers are considering buying a business, it is important that they can picture themselves as being the hero that transforms that business and takes it to a new level. It is a story of evolution and reaching new heights while simultaneously achieving one’s own goals.

It is no accident that so many of today’s mass culture storytelling revolves around sequels. The notion that there is a “storytelling continuum” where a buyer can plug into something that already has a history can be a powerful motivating force. Most epic stories have the hero as part of some sort of continuum. In other words, the hero does not simply appear out of nothingness. It is the hero’s mission to transform the world, in some fashion, for the better.

[1] https://www.forbes.com/sites/forbescoachescouncil/2018/05/09/how-your-emotions-influence-your-decisions/?sh=7bda49da3fda

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Each quarter, the Market Pulse Report issues a report revealing information about market conditions The report is supported by M&A Source and the International Business Brokers Association. The data that is analyzed is based on a comprehensive survey of business brokers and M&A advisors. The report focuses on Main Street businesses (with values up to $2MM) and the lower middle market (values between $2MM and $50MM.) 

The research is conducted and then the report is published each quarter to reflect the state of the industry. In this article, we will look at some of the key takeaways of the report and what it reveals about the path ahead for buyers and sellers.

Tracking the Labor Shortage 

For the second quarter, the report revealed a variety of interesting information. One massive data point from the report is that the labor shortage continues to be a significant variable for business owners. A staggering 92% of report respondents state that the labor shortage has negatively impacted their business with 54% stating that the shortage has had a “very negative impact” and 35% stating that the impact is “somewhat negative.”

Closing Times

The report further indicated that it is taking about seven months for a business to close. They noted that it takes about six months to a year to sell a well-priced business or a well benchmarked business. The report noted that approximately 60-120 days are spent in the due diligence or execution stage, once the letter of intent has been signed. 

The Strongest Industries

In terms of what kinds of businesses are selling, the report points to restaurants making a solid comeback. It is interesting to note that restaurants valued from less than $500K to $1 million are enjoying a particularly strong rebound. Business services, personal services, construction and manufacturing remain steady. 

In Summary 

The latest Market Pulse Report is pointing in several directions. Currently, three factors are impacting business owners, namely, the labor shortage, inflation, and supply chain issues. Many businesses have had no choice but to give large raises to employees, and others have been able to pass the costs on to consumers and buyers.

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