Selling A Business: Ditch The Business Transfer Agents
Before launching LawyerFair, I was partner in a corporate deals firm, helping business owners achieve exits from their businesses.
When someone decides to sell a business it’s a huge decision and one that leads to a considerable investment of time, resource and emotion, all of which distracts from the need to continue managing the business.
It’s therefore a huge problem if they select the wrong advisor and in particular, if they select one from the shark infested and unregulated world of the business transfer agents who, within their marketing material, may have done some or all of the following;
1. Sold the business owner a myth about their chances to sell;
2. Over valued the business to get the engagement;
3. Insisted on exclusive, punitive contracts with high redemption charges;
4. Charged a handsome up front/retainer fee or ….
5. Tried to sell the misleading benefits of “no win, no fee” contracts
The Result For Many Business Owners Who Instruct Business Transfer Agents?
– No Sale
– Huge Frustration
– Reduced (and potentially destroyed) Value
Follow this online thread to see how many business owners have suffered from similar;
Business Transfer Agents Don’t Need to Sell Your Business
The problem with selling small businesses is that most of them don’t actually sell.
They’re often lifestyle or sole trader businesses where the business owner is the business.
But Business transfer agents don’t admit this truth within their marketing material, instead spinning a mixture of ‘smoke, mirrors and mendacity’.
The truth is that selling businesses is a bonus to most Business transfer agents, their business model based around volume stock, tight vendor contracts and up front or redemption fees.
DIY Business Sales
Therefore, the owner of a smaller business is often best placed to launch a marketing campaign themselves, at least in order to gauge market appetite before incurring advisory costs.
Effective websites exist for business owners to find buyers direct and let me tell you, that’s all the transfer agent will be doing, but at an extra cost of many thousands of ££££ and without any guarantee of success. They may spin something about their “huge” database but that’s with people registered many years ago and/or have since died.
By listing on good websites, you can gauge market appetite in advance and you can always bring in expertise at the “business end” of a deal, when they actually add value.
And don’t believe Business transfer agents hype that their input makes all the difference when dealing with buyers. This is largely BS as they generally provide little more than an introductory service and a good number of buyers are actually put off when dealing with disinterested business transfer agents who lack knowledge about the business.
Where business owners do need help is in preparation and getting the business in good order, well before a buyer arrives. Time kills deals and problems emerging during a negotiation can often sound the death knell to a deal.
Final Words On Business Transfer Agents & Lawyers
Make sure the lawyer you instruct has completed multiple transactions and knows how to negotiate last minute problems to get the awkward deal over the line. What you don’t want is the local solicitor who dabbles occasionally in M&A and whose lack of experience could blow a perfectly good deal.
This I personally experienced as a local lawyer came in late to a deal and by overtly warning the business owner of minimal risk, managed to disrupt the chemistry of a deal that then fell over. The business subsequently failed to find a replacement buyer and ceased trading.
Written by Andrew Weaver, CEO at LawyerFair.