How to select the right advisor for your sale
Choosing an advisor to help you in the business sale process shouldn’t be a decision taken lightly. There are many points to consider in what is often a “once in a lifetime” process.
Firstly, consider the nature of your business and its likely buyer. Is it likely to be a trade buyer, an individual or an investment company?
This step is to match the best approach to the sale of your business, to the services offered by the advisor or broker.
Advertising-driven brokers may be better for businesses that might sell to an individual (such as small shops, hospitality and food outlets);
For larger businesses, that would be expected to be sold to another business, there is a choice between a “broker” and specialist corporate finance advisors. Large brokers often rely only on their database of existing contacts. However, it is our view that corporate businesses better suit a hands-on, advisory led approach which selects and directly targets both suitable trade buyers and investment buyers.
If you are thinking about engaging a large broker, such as KBS Corporate, then you need to establish what that broker will do to find the right buyer for your business and if this is the right approach for your business.
Sale value is maximised when all potential buyers have been approached, so your advisor needs a strong research function to identify all appropriate trade buyers, in addition to their own database of acquisitive parties. You need to be confident that all potential buyers have been approached in the process.
Secondly, choose an advisor with a strong success rate in selling similar business.
Our success rate is over 80%. From our research of the larger brokers, such as KBS Corporate, their success rates appear to be considerably lower – almost the opposite of ours!
We achieve a high success rate as a result of our dogged determination! We spend time understanding each clients’ business operations, its market, and its growth opportunities. We then use that information to produce a bespoke strategy for each client, with carefully researched targets.
Thirdly, make sure that you have a realistic price expectation – not just what you want to hear!
It is important at the outset to ensure that both you and your advisor have agreed, aligned price expectations and that your advisor is incentivised to achieve and exceed these.
An initial, outline valuation should be provided by the advisor before terms are committed to and the price / profit multiples used should be referenced to similar deals successfully completed by that advisor.
The initial fee charged should be a commitment fee to the process, not a means of covering all costs and generating profit. The advisor’s financial reward should come from their success fee.
Lastly, consider who will be advising you and who will be leading the discussions with potential buyers.
Many “brokers” say that successfully selling a business for the best price needs salesmen not professional advice. In our view, this is absolutely wrong; the process needs expert corporate finance skills developed from advising on many transactions, along with detailed knowledge of the client’s business. Maximising the sales value is all about finding the right buyer who can enhance the profitability and/or growth potential of the business. The skill is demonstrating to the buyer that in their hands the profitability of the business will be far greater than has historically been achieved and this is where premiums will be paid and higher profit multiples achieved.
If you are thinking about appointing one of the large brokers, ask to meet the sales executive who would be allocated to you and references from their recent successes. We offer a professional, Director-led service, with a single main point of contact. For example, I am a Chartered Accountant with 25 years of experience in selling businesses and, for my clients and their potential buyers, I am the main point of contact. The full understanding of each client’s business, its finances and operations that I gain in the process gives me the knowledge to drive the best deals with the best buyers.
Don’t forget to consider the chemistry and trust between yourself and your advisor – you’ll be working closely with them through the process, which is likely to include some intense and difficult meetings. Are you confident that they have the experience and professionalism to support you in this journey?
