Selling Businesses: Managing the Client’s Expectations
23 August 2021 Selling businesses is not like selling real estate. Of course, no matter what you’re selling, it has to be priced correctly, but selling a business generally takes longer than selling a house or a piece of property. (To offset that minor inconvenience, the broker’s payday when selling a business is usually MUCH higher!) That’s just one aspect of the process that the client must understand but it’s a crucial part of managing the client’s expectations. For business brokers, managing the client’s expectations in an ongoing, multi-aspect process that must be attended to if the broker wants not only a successful transaction but also a satisfied client, even if the business doesn’t sell.Where Does It Start? Time and Money
When selling businesses, facing reality is the name of the game. The anticipated sale is likely to be the largest transaction of the seller’s life and unlike anything the seller has ever done before. We have to assume that, at best, they’re ignorant of the process or, at worst, equate it with selling a house, an event most sellers will have some experience with.
Financing
In the Main Street and Lower Middle markets, more than 80% of deals include some amount of seller financing. To you business brokers, it is impossible to overstate the importance of advising your selling clients about this statistic. If the broker’s valuation work suggested that the business’ value is $1.5 million and the client agrees to the broker’s recommendation that the business be brought to market at $1.7 million, the seller will automatically assume that they will walk away from the closing table with a check for about $1.35-$1.4 million (after some negotiation and broker commission). But that’s unlikely to be the case. Most deals will have the seller holding a note and there’s no telling how much of the purchase price that note will represent. The client must know going in that there is a strong likelihood that he or she will be helping finance the purchase – especially if the seller wants to ultimately receive something close to the business’ value._____________________________________________________________________________
Our course, “Learn How to Value and SUCCESSFULLY Sell Businesses“, teaches you how to value and sell businesses.
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Buyers: Issue #1
When selling businesses, we have to try to identify – at least at a general level – the types of buyers that will likely be interested in the specific business.
We’ve launched a coaching program specifically tailored to Realtors that want to sell businesses, business owners and to anyone that wants to become a business broker.
If you’d like to learn more, email me at joe@WorldwideBusinessBlog.com
Buyers: Issue #2
After 20 years in the business brokering trenches, I can tell you that buyers are a pain in the patootie. No, not really. In fact, not at all.
The Bottom Line
Selling businesses is a process and there are many aspects of that process that we business brokers must address with our clients even before any engagement agreement is signed. Some of these issues – time and pricing are two big ones – should be done during the initial meeting as this meeting sets the tone for a client’s expectations. It also establishes the level of your competence in the mind of the client and the tone of the relationship as the selling process unfolds. If you have any questions or comments on this topic – or any topic related to business – I’d like to hear from you. Put them in the comments box below. Start the conversation and I’ll get back to you with answers or my own comments. If I get enough on one topic, I’ll address them in a future post or podcast. I’ll be back with you again next Monday. In the meantime, I hope you have a safe and profitable week.
Joe

The author is the founder of Worldwide Business Brokers and holds a certification from the International Business Brokers Association (IBBA) as a Certified Business Intermediary (CBI) of which there are fewer than 1,000 in the world. He can be reached at joe@WorldwideBusinessBlog.com