DIY is OK for Most People, but Not for All Circumstances

What qualities should a person possess to excel at selling businesses? Probably a lot of things, and creating, buying, and selling a few businesses for your own account can’t hurt. Might you be thinking of selling your business, or are you within five to ten years of selling but want to make sure it’s well-positioned when that time arrives? If so, perhaps you should meet my friend Erik Porter of Business Acquisitions, Inc., who has bought and sold many businesses and probably knows exactly how to help you sell yours.

At the most basic level, Erik says, “business intermediaries (brokers) are much like real estate brokers. We’re the person who will interact with all those prospective buyers. As the seller, you the last thing you want to do is talk with dozens, perhaps hundreds, of potential buyers because your business will suffer.” He has found that most potential buyers have good intentions, but many are not familiar with what it takes to buy a business. “Finding a good buyer is like sifting through the ore to find a diamond,” he says, “we look through a lot of options to find the best.” Erik and his team at Business Acquisitions do all the work of finding qualified, capable buyers so their client can continue focusing on growing and operating their business.

While his own, first-hand experience of building and selling several businesses is helpful, Erik says it takes a lot more to successfully work with clients to help them sell their businesses. “What matters the most,” he says, “is temperament, availability, and how an intermediary represents clients.” Erik believes that the best intermediaries are consistent and do not overpromise or oversell. For example, at the time of our interview Erik was working on a deal for which the parties have been negotiating for 15 months but that Erik expected would close within a week. Erik attributed his success in shepherding the seller successfully through this lengthy process to having been consistent and patient and having helped the client understand and remember that successfully selling a business is a long process.

Not one for short-term relationships, Erik commented that if he enjoys a great relationship with a client, he rarely thinks about whether he’s getting paid because the client is important to him. For these clients, Erik’s entire focus is on negotiating the best outcome. “At the end of the day,” Erik shared, “having that special relationship, which often endures for years, and knowing the client appreciates you – that’s what it’s all about.” As an example, Erik noted that he’d played golf on the day before our interview with a client whose business he had sold more than six years prior.

When I asked what clients say about him most often, Erik replied, “I don’t know how you do it, dude.” When a seller tries to negotiate and close a sale and purchase transaction, most often the parties get frustrated, the process becomes complicated, and the seller struggles to manage the buyer and the never-ending barrage of interruptions and requests for information. Erik shared that he loves managing the whole process. He stated that he enjoys people and the process of working with clients and buyers to find the right combination and deal terms. While Erik focusses his attention on successfully moving the parties through the process, his client can remain focused on running their business. Erik is convinced that most of his clients only appreciate the amount of time and effort Erik devoted to working with the buyers, getting data and information to them, and following up after the transaction has closed.

Sellers who have tried to sell on their own find that their business suffers during the negotiation and closing process. Not only do these sellers experience all the complications, interruptions, anxiety, tension, and frustrations that accompany the process, but they often find that their financials suffer because their attention is consumed during the process. Many have also found that buyers use these deteriorating financials to justify lowering the sales price. Sellers who engage an intermediary not only avoid the emotional toll of the process, but also continue to focus on operating the business and maintain or increase the sales price.

Erik allowed me a peek into his personal values by sharing that he most respects clients who aren’t ready to sell, but who have an eye to the future. These people are identifying and improving the things that drive the value of their business, concentrating on what they should focus on now, and preparing for how their focus will change over time to continue to drive value. “I appreciate those who have thought about the things that drive value ahead of time, especially years before taking their business to market.”

“It’s a lot like going in for a checkup with your doctor – the best thing you can do is to have a full checkup every year. The result should tell you what buyers and their bankers will like about your business and what they’re likely to hate. Most important, here’s what you can do about it. Align yourself with somebody who’s not going to chase you, will check in once a year to get the data and stay up to date, and be there when you’re ready.” Erik says. “It’s a great pleasure to work with those who have already thought about what parts of their business might drive a lender or broker crazy. Even though there’s typically some peculiarity about every business, I appreciate working with those who have struggled with normalizing the peculiarities before they engage me.”

Erik told me that he strictly follows his onboarding and go-to-market process. Consistently following his process is likely why he’s so good at what he does. “I send you business because you have a process. That’s the one thing I hear from my referral partners all the time,” he says. “My banker colleagues tell me that our market valuations are never out of whack or don’t fairly estimate a business’ value.” To start with, Erik uses and sticks to his checklists, noting that his team won’t take a business to market until they have obtained and reviewed all the data. The client must also review and approve the documents and information Erik uses to present the business to the market.

While Erik’s valuations are typically conservative, he shared with me several examples in which he’d helped clients get the most from the sale. In some cases, Erik recommends going to market without stating an asking price so that the buyers’ offers inform the seller and the advisors the price the market will support. Another approach Erik frequently recommends involves specifying an asking price while anticipating that a seller-friendly market will provide a premium. In each case, Erik stresses that he will never over-promise what the client should expect. He’ll honestly tell clients what they should expect, knowing that some clients will be attracted to other intermediaries who inflate their promises to win the client’s business.

Another way Erik helps his clients is by finding, in the right circumstances, ways for the buyer to purchase the client’s stock instead of buying the assets of the business. In these cases, the seller’s tax bill is significantly lower, and in many cases the contracts and paperwork are simpler. Erik shared that in one such transaction he recently closed, the accountants who were working on both sides of the transaction were surprised that Erik successfully negotiated the sale to benefit both his client and the buyer.

When engaging the intermediaries for the sales of his own businesses, Erik asked himself “Do I like them? Do I trust them?” Business brokers aren’t necessarily easy to like,” he said, “they might do good work but they can still be hard to like. If you like the person, chances are that buyers are going to like them too.” You shouldn’t underestimate the importance of likeability because you will probably spend a lot of your time and attention interacting with the person you choose.

If any of this sounds like something you’d like more information about, or you’d like to get on Erik’s calendar for an annual wellness check-up for your business, please reach out to me. I’d be honored to connect you.