The Confidential Process of Marketing a Business
Selling a Business and the Role of a Business Broker
By Greg Younts, CMAI, GABB Broker
A unique challenge of selling your business is that you cannot advertise certain confidential details about the business, and yet you have to target and attract the attention of the right buyers. Specific details about the business such as business name, exact location and unique products or services offered typically cannot be revealed to the public. It could be disastrous if employees, customers, competitors or other third parties discovered the business is for sale. So, how do you confidentially market your business for sale and attract the attention of the right buyers? In an article for the Atlanta Small Business Network, Greg described several possible options for developing a successful confidential marketing plan for taking your business to market, and you develop a custom plan that will best fit your unique business.
Your marketing plan and associated marketing documents should highlight what is unique about your business without revealing so much information that you risk compromising confidentiality. Second, you identify who would be the most likely buyers and structure your marketing plan and message to get the attention of these buyers. The right buyer could be an individual, another business, Private Equity Group and/or other possible groups of investors. And third, you determine the best strategy to get in front of your potential buyers.
If an appropriate method for taking your business to market is to advertise to the public; using business listing websites, business trade journals, trade shows or any other appropriate advertising medium can be effective. Or, a more targeted marketing strategy might be best for your business. You may know specific buyers who would be interested in your business, and industry research can be performed to identify a list of potential buyers within your industry. In this targeted approach, the best strategy may be a proactive direct mail and phone campaign to contact this group of buyer prospects. It also might be appropriate to execute a broader strategy that includes both public advertising and targeting a select group of buyer prospects.
Regardless of the marketing strategy that is right for your business, key tools that could be used in this process are some form of public advertisement and/or business profile that is often referred to as the “blind profile”. The profile is blind because it does not reveal confidential information, but does provide key facts about the operations and financial performance of the business that buyers need to see. Multiple versions of the blind profile might be required for your business if different types of buyer prospects are contacted. A blind profile typically contains more information about your business than a public ad. It is often sent to a buyer after they respond to an ad and is sometimes included with a letter in a direct mail campaign.
The most widely used form of public advertising for businesses on the market are the business listing websites. The Georgia Association of Business Brokers maintains a website where its members list businesses for sale in Georgia, and other businesses for sale by GABB brokers. This site and others allow business owners the flexibility to provide a comprehensive profile of their business without disclosing confidential information. Buyers mau search for businesses by criteria such as type of industry, geographic location, sale price, annual revenue, cash flow, availability of owner financing, etc.. And, there is the option to search by keywords to find a very specific type of business.
An experienced business broker knows how to write a listing site ad that will best describe your business such that it will be found and read by the right buyers. Too often, business owners provide a very poor description of their business. In my experience, business buyers are often frustrated by how difficult it is to find businesses that are accurately described with the key information they need to see if it is a business they want to pursue. This is one of the major reasons why some businesses do not generate strong buyer interest or catch the attention of the right buyers on listing sites.
Experienced business brokers and M&A professionals can help you develop a marketing plan and the related documents. They know how best to describe your business in an advertisement and blind profile, and make sure it reaches the right buyer audience. They know what appeals to buyers and how to make your business standout as an exceptional acquisition opportunity. They know how to impress and capture the attention of C-level executives, Private Equity Groups and individual buyers. And, as buyers express interest in the business, brokers know how to engage with buyers to further determine if they are qualified in terms of background, skills, experience, interest level and financial profile.
Top business brokerage and M&A firms have marketing and industry research staff to support their brokers in developing the marketing plan, blind profile and other marketing documents that will be used for their clients. They have access to various sources of industry data sometimes needed for identifying a list of potential buyers for a business. These firms have also developed several third party relationships that give their clients the best and broadest possible exposure to top buyers in the marketplace. They have relationships and affiliations with various state, national and international Business Brokerage and M&A associations. And, they are in contact with thousands of Private Equity Groups, corporations and other possible sources of buyers.
The successful confidential sale of your business largely depends on developing and executing the right marketing plan for your unique business. Failure to take a business to market the right way has resulted in businesses not selling or businesses being sold well below market value. If you are selling your business and need expert guidance through the confidential process, you should consider the services of a business broker. The investment in the services of a business broker could result in recognizing an after-tax gain on the sale of your business that will easily justify the broker’s fee.
Greg Younts is a Certified M&A Intermediary and has more than 30 years of experience working for companies in sales, marketing, and management capacities. He started his career in the information technology field where he focused on the design and sales of strategic technology solutions to meet the needs of companies that range in size from small business to the Fortune 100. He has served companies in every major industry throughout North America.
Read MoreWhy You Should Focus on Proper Exit Planning
If you are like many business owners, you are primarily focusing on building your business. Unless you want to work until you drop, you should start thinking about what you’ll need to do to sell your business. Many businesses can take years to sell or even fail to sell all together. For this and many other reasons, it is important to invest some time and energy into thinking about proper exit planning and strategies.
In a recent Forbes article, “How Proper Exit Planning Benefits the Buyer and Seller,” author Walter Deibel discusses his interview with John H. Brown, author of Exit Planning: The Definitive Guide. Brown and Deibel both agreed that, when properly handled, exit planning can help both the seller and the buyer. Deibel is the author of “Buy Then Build: How Acquisition Entrepreneurs Outsmart the Startup Game.”
Exit planning can make a business more transferable. As Deibel points out, when buyers are evaluating businesses, transferability is a key factor.
“Once the current business owner leaves, are they taking a lot of specialized knowledge with them that the buyer will need to grow the business?” asked Deibel. A buyer must feel that he or she can walk into a business, take it over, keep it running effectively and even grow the business in the future.
A key aspect of being able to buy a business and having that business be successful is that all relationships from vendors to customers are transferable. A good management team, one that can help a new owner thrive, is a must. Building that team in advance is a savvy move for any business owner looking to sell their business. Concerns on any of these fronts can spell doom for a seller. If a buyer doesn’t feel that they can operate a business, then they probably shouldn’t be buying it.
Great exit planning definitely benefits the seller as well. When sellers engage in exit planning, they realize how much money they need in order to exit, Deibel notes. This forces sellers to become very focused and goal-oriented. Sellers will take proactive steps to ensure that their business is as appealing to a potential buyer as possible.
“Exit planning is not about squeezing every last drop of value from the business or taking all the growth opportunity off the table,” Deibel says. That “end gaming” approach to exit planning can discourage potential buyers.
Ultimately, proper exit planning is a win-win, one that benefits both buyer and seller. “When done correctly, exit planning gives the seller clarity, lowers the risk for the buyer and leaves the door open for future growth,” Deibel says.
Buying or selling a business is a multifaceted, and often quite complex, process. The sooner you begin working with a professional, like a business broker, the better off you’ll be in finding the right business for you and your particular needs. For most people, buying or selling a business is the financial decision of a lifetime. Having a proven trusted partner, one that knows the lay of the land, is simply invaluable.
Copyright: Business Brokerage Press, Inc.
How to Write an Effective Business-for-Sale Listing
Georgia Association of Business Brokers can now post business-for-sale listings on the new GABB website. But, as BizBuySell points out, it’s important to create a well-written online listing. You want to attract qualified buyers. According to BizBuySell’s latest demographic survey, business buyers tend to be college educated and earn over $100,000 per year. Buyers are more likely to respond to listings with these specific attributes, according to the website.
1. Specify a location.
Most buyers search for a business by state, many by a specific county. Confidential listings receive more views when they included a location.
2. The listing appears in their search category.
More than a third of prospective business buyers search in a specific category of business. You can improve that percentage by selecting two or more appropriate categories for your listing.
3. Include key financials.
Most buyers want to know the asking price, followedg by cash flow. Including these important financial details makes it easier for serious buyers to find your listing in a search and contact you.
4. A great headline.
“Profitable coffee shop in busy shopping mall,” and other headings with key details are better than “popular cafe.”
5. A well-written description.
A good description has all the essential facts, such as the business’s strengths and potential, number of employees, the owner’s reason for selling, and opportunities for expansion. Beware of exaggerations. A hyped-up listing will alienate serious buyers.
6. An attractive photo.
Even if you cannot use a photo of the actual business for confidentiality reasons, you should still post a stock photo. A good site to find generic, free stock photos is Pexels. The GABB administrator can also help you find photos. Buyers are more likely to notice listings with photos.
7. Seller financing!
Experienced business brokers know that financing is one obstacle in selling a business. So it’s a huge advantage if the owner is willing to carry part of the financing. Seller-financed businesses are more likely to sell than those that are not.
8. Broker contact details.
Your listing should include details on how to reach you easily. Every prospective buyer should receive a response from their inquiry within the first 24 hours. A slow response might mean you miss a qualified buyer.
The GABB website’s new listing feature is still undergoing improvements, so please let us know if you have suggestions for using this feature. To date, this feature is included in your GABB broker membership at no additional charge. For help with this feature, please contact GABB Executive Director Diane Loupe at georgiabusinessbrokers@gmail.com or GABB President Dean Burnette at 912-247-3209 or dean@b3brokers.com.
Read MoreTackling Growth Delusions When Buying a Business
It’s exciting to buy a new business. However, it’s very important to be realistic about future growth. In most cases, if a business is poised to quickly grow substantially, the seller would be far less interested in selling.
When evaluating a business and talking to the owner, many buyers come away with a sense that enormous growth is just “sitting there” waiting to be seized, writes Richard Parker, President of Diomo Corporation – The Business Buyer Resource Center. In a recent article for Forbes entitled “Don’t Be Delusional About Growth When Buying a Business,” Parker seeks to instill a smart degree of caution into prospective buyers. Parker, who works with investors buying and selling small businesses, says buyers should be very careful if they are buying into an industry that they know nothing about.
Buying into an industry you don’t know comes with a lot of potential problems. The opportunities that you see may not have been tapped into by the existing owner for many reasons, Parker says. Without knowing more about the industry, you’re unlikely to spot those problems. Since you are an outsider, you likely lack the proper perspective and understanding. The seller may have already tried and failed at the growth opportunities you’ve identified. Until you actually own the business and are running it on a day to day basis, you can’t make a proper assessment of how best to grow that business.
The seductive lure of growth shouldn’t be the determining factor when you are looking for a business. A far more important and ultimately reliable factor is stability. “The key question to address is whether or not the business will maintain its revenue and profit levels after you take over,” Parker advises. A business that doesn’t have to grow to remain viable is a better value.
As Parker points out, the majority of small business buyers will buy in a sector where they don’t have much experience, and that is fine. It’s more important that the buyer “has the core skills to operate and drive the business than having direct industry experience.” What is not fine is paying a lot for a business because you believe you can greatly grow the business. If you can, that’s great and certainly icing on the cake. But Parker says you shouldn’t depend on that growth.
In the end, everyone has some ideas that work and some that don’t. You may take over a business and, thanks to having a different perspective than the previous owner, you find ways to make that business grow. Just realize that many of your ideas for growing the business may fail completely.
“To be a successful business buyer, your approach has to be effective, realistic and practical,” Parker says. “Don’t fall in love with the business or fall prey to your own sales job. You have to evaluate all scenarios and adopt the philosophy that stability is a top priority.”
A professional business broker will be able to help you determine what business is best for you, and to determine a fair asking price for that business. A business broker will help keep you focused on what matters most and steer you clear of the mistakes that buyers frequently make when buying a business.
The Theory and Practice of Business Brokerage within the Context of Real Estate License Law & Rules
By Kathryne A. Pusch, President & Consultant, ConsultKAP, Inc.
Potential clients and prospective business brokers often ask GABB “What are the legal licensing requirements of professionals assisting buyers and sellers of businesses in Georgia?”
I think I can answer this question because I was a business broker for many years, am a former Board Member and President of GABB, RE Instructor, and was a past member of the Georgia Real Estate Commission’s (GREC) Education Advisory Board.
Here’s what the law says:
GA Law 520-1-.12 Business Brokerage.
Unless otherwise excepted from licensure requirements by O.C.G.A. Section 43-40-29, a person who brokers the sale of a business must hold an appropriate license issued by the Commission if the sale of the business involves the transfer of any interest (including, but not limited to, leasehold or ownership interest) in real property. A business broker and any of the business broker’s associates who do not hold licenses issued by the Commission may not negotiate or attempt to negotiate or assist in procuring prospects for the sale of a business where:
(a) that sale involves the transfer of any interest in real property,or
(b) where the payment of all or part of a commission or fee to the business broker or any of the business broker’s associates in the sale of a business is contingent upon the transfer of an interest in real estate.
An unlicensed broker may not perform or attempt to perform the acts in the preceding sentence and then secure a person licensed by the Commission to approve that transaction.
Under Georgia law, anyone selling or buying, offering to buy or sell, acquiring prospects to buy or sell or negotiating for the buying or selling of real estate for compensation must be licensed by the GREC. According to section 520.1-.19 of Georgia law, Business Brokers are covered by the same legal requirements as any Real Estate licensee if the sale includes the transfer of any interest in real estate.
While some interpret that to mean you don’t need a real estate license if you are selling a business and not any property (as in dirt or brick & mortar,) in fact, there are few instances in which this is the case.
Active businesses operate out of and occupy premises that are either owned or rented/leased, with the exception of a home-based business. Any business Purchase & Sale contract will contain a contingency that the RE interest (freehold or leasehold) must transfer from the seller to the buyer. (If it does not, the business will not have premises in which to operate after the sale.)
Any third party lenders of the funds to complete the transaction will also require a lease or RE purchase agreement to approve the loan for the business acquisition, which will be a contingency of the sale.
Therefore, anyone who is advertising a non-home-based business for sale listing is offering for sale a business that includes either a leasehold or freehold interest in real estate, whether or not the listing summary/web site ad has a box checked for “Real Estate.” In fact, unlicensed people who sell businesses will NOT check “Real Estate,” despite the fact that there is a business facility owned or leased, because they are NOT LICENSED.
Anyone who is negotiating with sellers and buyers for the purchase and sale of a non- home-based business for sale is involved as a broker in a transaction that includes either a leasehold or freehold interest in real estate. Therefore, that person must have a current Georgia real estate license under Georgia law.
The terms of the real estate purchase or the rent or lease terms (occupancy costs) are always a key factor in business expenses and profits, and therefore a key factor in the investment decision, so it is not possible to negotiate for the purchase and sale of a business without including the real estate factors.
The occupancy of a going concern cannot be separated from the operation of the going concern or from the profits of the going concern on which value of that going concern are based. Business brokers who are unlicensed are operating in violation of Georgia license law, regardless of how they “spin” their advertising.
Business brokers cannot assert that they are not violating license law by claiming that they have an attorney or a licensed broker to “handle” the real estate aspects of a “transaction” because of the above facts related to the inseparability of occupancy from the business going concern which is being offered for sale. The exceptions would be home-based business; non-operating businesses: sale of assets or inventory only from a closed business; or new franchises – sales by a franchisor to a franchisee of a not yet operating unit.
The GABB encourages you to let us know if you come across individuals who are operating as business brokers without the proper licenses. Contact any individual member of the board, or email the entire board at gabbboard@gabb.org.
Questions? Email: KAP@Consultkap.com
Main Office: 770-918-9390 Cell: 770-309-8580
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GA Law 520-1-.12 Business Brokerage.
see also O.C.G.A. §§43-40-1; 43-40-2; 43-40-29; and 43-40-30.
Authority O.C.G.A. Secs. 43-40-2, 43-40-14. History. Original Rule entitled “Examinations” adopted as ER. 520-1-0.1-.12. F. and eff. July 12, 1973, the date of adoption. Amended: Permanent Rule entitled “Licensee’s Duties Upon Surrender, Suspension, or Revocation of License” adopted. F. Dec. 7, 1973; eff. Dec. 27, 1973. Repealed: New Rule of same title adopted. F. June 4, 1980; eff.July 1, 1980, as specified by the Agency. Amended: Authority changed. F. Aug.5, 1982; eff. Nov. 1, 1982, as specified by the Agency. Amended: F. May 9, 1985; eff. July 1, 1985, as specified by the Agency. Repealed: New Rule entitled “Business Brokerage” adopted. F. Nov. 12, 2003; eff. Dec. 2, 2003.
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