Even if You’re Small, You Still Need Professional Advisors to Sell Your Business
If you have over $100 million in revenue, you can get pretty much any M&A advisor from New York or Chicago to fly down on their private jet to visit you to discuss the sale of your business. If you aren’t that size or larger, business owners think that involving a business broker or M&A advisor can’t possibly be worth the fee.
The fact of the matter is that even down to the very smallest businesses, it makes a great deal of sense to involve a professional team when you decide to sell. It might even be more important for those that own a small business. For example, large businesses often are public or have publicly-traded competitors, and therefore have a readily available valuation picture. Small businesses do not have market valuation visibility, and only a broker with market expertise will be able to tell you what’s happening in your particular industry.
Private equity groups that own small businesses will almost always use an M&A advisor to sell their portfolio companies. As a business owner you have to ask yourself, “If the professional investor/owners use business brokers to sell, why wouldn’t I?” A business broker will add, on average, 20% more to the purchase price of the business, which will more than compensate the business owner for any fees. The professionals know this and business owners need to use their same tricks.
“The Value of Middle Market Investment Bankers,” by Fairfield University Dolan School of Business professor Dr. Michael McDonald, surveyed 85 business owners who sold their businesses with the help of investment bankers in the $10 million and $250 million range between 2011 and 2016. One-hundred percent of respondents said that the bankers added value to the process, with 69% saying the value-add was “significant.” So, even when the businesses were small ($10 million of transaction value), investment bankers added value.
If you own a small business and you are thinking of selling, go through the process of finding a broker. Don’t let your lawyer “just do it for you” and don’t try to do it yourself. You have probably spent years building this business and you should exit it in a professional and thorough way.