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Don’t Walk That Road Alone

I want to sell my company to them, but I don’t think I need a business broker. On the other hand, I’m pretty sure I need help getting through this. Is that what you do?” Linda (not her real name) started her business in 2005. She describes some “dark times” going through the recession of 2008-2009. But in the past five years she has flourished, and now has thirty employees and dozens of regular clients.

I met Linda through an introduction of her wealth manager. The three of us met over coffee to discuss her situation. Though 62 years old, Linda hadn’t been thinking about selling or slowing down. But, after speaking at an industry conference at The Breakers in Palm Beach, she met the CEO of a national company that offered consulting services similar to hers. Linda laughingly described how it happened. “At first, I thought this guy was just being nice or maybe hoping to get competitive information about the Nashville market.” But her tone turned serious as she continued. “It didn’t take me long, however, to realize he was interested in an acquisition of my company. He told me they wanted a presence in Nashville, and buying my company would be faster.” Then Linda got really serious. “It wasn’t lost on me that if he didn’t buy my company, he’d one day be a competitor, and a good one at that.”

I told Linda she was right, she didn’t need a business broker in a situation like this, which I call “a single-buyer process.” I explained she would need a broker if she thought she wanted to sell, but hadn’t identified the likely buyer. But, I went on to explain why she would be well advised to retain a broker (a/k/a, professional intermediary) to walk through the single-buyer process with her. “Walking that road alone can be very dangerous,” I told her and here’s why.

First, when a bigger company expresses interest in buying yours, it’s likely they’ve done it before. Meaning, they have experience at the process and you don’t. If you don’t like those odds, you are smart, don’t walk that road alone. Second, you want to make sure their offer is as good as what you could get if the business was sold on the open market. This requires the help of someone who knows and understands the market for a business like yours, so don’t walk that road alone. Finally, going from “we want to buy your company” to “the money has been wired to your account” usually takes months of detailed planning, negotiation, and analysis. A smart business owner will have by their side a strong and experienced been-there/done-that consultant. “After all,” I said to Linda, “you can’t leave your business unattended while you focus on the selling process.” Or said this way, you should not walk that road alone.

The cost to retain a broker (or consultant) through a single-buyer process should not be more than 2% of the total deal value. Dependent on the size of the deal, the fee could be well below 2%.

I frequently get calls from business owners like Linda who have received an unsolicited offer to buy their company. In many of those situations, they don’t need a broker, but like Linda, they definitely need the help of a been-there/done-that consultant. The smart business owner knows they don’t want to walk that road alone.

JIM CUMBEE is President of Tennessee Valley Group, Inc. a retainer-based business brokerage and transition mediation firm in Franklin, TN. Cumbee is an attorney and has an MBA from Harvard Business School. Jim is the author of Home Run, A Pro’s Guide to Selling a Business. .  He has a wide range of corporate and entrepreneurial experiences that make him one of the most sought-after business transition advisors in the state of Tennessee. The names and fact patterns above have been changed to preserve the parties’ identities.

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Tennessee Valley Group

Jim is an attorney (non-resident status with the Missouri Bar) and though he no longer practices law, he has read and negotiated enough legal documents to fill a cargo tanker. He has an MBA from Harvard Business School and knows how Wall Street and private equity operates. Jim is a Tennessee Supreme Court Rule 31 listed general civil mediator with tons of experience helping business owners (large and small) work through sensitive problems to achieve winning results. He is the author of "Home Run, A Pro's Guide to Selling Your Business, Seven Principles to Make Your Company Irresistible."

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