If you want to sell a business, you’re going to need a team to support you. The core team will include:
- An exit planner,
- a business broker,
- a business lawyer,
- and a CPA.
The exit planner to help you maximize the purchase price when you do sell. This involves identifying and improving key levers that will reduce risk to buyers and improve overall performance of the business. You need to show likelihood to continue as-is, potential to improve the operation, and the lowest risk as possible for someone new stepping in. The exit planning consultant is often paid on a fee-basis.
A business broker will help with listing, vetting buyers, and negotiating deals. There may be overlap with the exit planning consultant, or they may be the same person. Different people will handle it in different ways. The broker is often paid a commission of 10% on the sale of a business, though some also charge fees and may adjust that commission down depending on the fee structure. The broker themselves is far more important than the fee structure as paying some upfront or ongoing can align incentives to actively work on your account.
A business lawyer will help you to ensure your contracts are properly structured, fair, and derisked. This will involve documents on the buyer or sellers side, including but not limited to the LOI (Letter of Intent), APA (Asset Purchase Agreement), Non-Compete, Lease Agreements, and Seller Notes. Lawyers are often paid on a fee basis, whether by the hour or often by prepaying a retainer. Some lawyers that deal with the SMB M&A space frequently will hold fees until post-close to support their clients as well.
A CPA. These type of relationships are often developed with one starting point: whether it’s a CPA you trust, an insurance broker, or another business owner. However, there are many times that a referral doesn’t yield the right partner for you and your specific need. Always meet with at least two or three potential partners to properly assess them.
While most people start with a CPA or business lawyer because that is an existing relationship they have for their business, it isn’t necessarily the best. Both parties tend to be highly confident in their business acumen and yet extremely low risk by nature, so it may be best to find someone who deals with SMB M&A exclusively, and those with relevant experience to your business. If you have a $2M revenue business and talk to an intermediary who helps businesses with $10-100M in revenue sell, there may be a misunderstanding of your market.
In short, start by finding an exit planner to support you. They come in at the start of the process and this is the realm they deal within. Find one who is a good fit for you specifically.
About the Author
David is Bbg, Inc.’s managing director. He focuses on driving strategic growth and operational effectiveness. Passionate about helping others be at their best and fostering collaboration, he ensures excellence is seen in the clients we serve and the businesses we operate. Follow David on LinkedIn