10 important points to consider when it is time to sell your business

Often, as operators prepare to sell their business, they say, “I am an experienced business professional. Why do I need a broker to sell my business?”

After spending years convincing their customers that DIY (Do-It-Yourself) is not the way to provide vending, pantry service or OCS, some operators forget what they have been preaching when it’s time to sell their own business. It’s a potential disaster, with guaranteed stress.

DIY? Really?

Operators issue dire warnings to office and facility managers who threaten to operate their own coffee equipment, fill their own vending machines, purchase their own point-of-use water filtration equipment, and order from Costco instead of using an operator for pantry service.

The selling points are powerful

There are so many reasons to use a service for office refreshment, and operators know them by heart. Yet, there are some operators, when looking at the biggest business decision of their life — a decision that can create multi-generational wealth — take the route of a headstrong office manager and choose to go the DIY route.

The DIY approach to selling a business has some features that operators can do without. A slower deal, a limited number of buyers, confidentiality issues, the added stress of trying to sell and run a business at the same time, and the one nagging question that can haunt a DIY seller: “Did I really make the best deal?”

That’s why smart operators choose to get some help from an experienced sell-side broker on the most important deal they will ever make. Consider these important points.

1. Dump the emotional baggage

There are several reasons why DIY is a bad choice, and the first reason is objectivity. An objective third party can execute a transaction without the emotional baggage that comes with being the owner. Objectivity translates to a realistic valuation, improved preparation and an elevated marketing effort.

2. Experience really does matter

An operator needs a mergers and acquisitions (M&A) team that has years of experience on their side. VBB Advisors has been involved in M&A, facilitating deals, for about 40 years. As in every business, there is no substitute for experience, especially when an operator is facing off with a savvy buyer.

3. Buyers aren’t always obvious

One of the positive by-products of experience is knowing who the buyers are. While it is tempting for an inexperienced business broker or a DIY seller to pursue the “obvious buyer” for a business, it is important to understand that the obvious buyer is often not the “optimal buyer.”

My approach involves a process that will confidentially market the company to numerous possible buyers, including operators, private-equity firms, entrepreneurs outside the industry — even bottling companies. Competition is a good thing, and it will translate to a higher selling price and getting the terms and conditions of a deal that are in line with the wishes of the seller.

4. An experienced broker knows what each buyer values

When a business broker has facilitated multiple deals with multiple buyers for many years, as VBB Advisors has, there is an understanding of what each buyer has on their priority list.

It can be gross profit margins, percentage of contracted business, number of key employees available, real estate, a certain brand of technology, a great deal of recurring income, significant micro market business or OCS business as a large percentage of sales.

Knowing in advance what each buyer values is an advantage to the seller.

5. The best buyers are thrilled to see an experienced broker on board

Solid, legitimate buyers know that the entire M&A process will be easier because Mike Kelner of VBB Advisors is acting as the sell-side intermediary. The buyer will not be forced into a position of educating the seller on the nuances of an acquisition.

Additionally, when a seller has VBB Advisors on their side, the trust level between the buyer and seller is increased because the seller can rely on VBB Advisors to ensure that the selling price and terms align with the seller’s needs.

6. Proper preparation — take steps to strengthen the marketing effort

After the valuation process is completed, we ask, “Where do we want that valuation to be when we market the company, and how do we elevate the business to that level over the next 6 to 12 months?” We then establish key benchmarks to enhance the company’s value along the way. For example, we set deadlines and benchmarks for specific actions:

We need to have the financials cleaned up.
We need to cut certain costs.
We need to raise prices at these locations.
We need to sell “this many” new accounts.

Our approach gives operators access to our team and our resources. That means quarterly calls to review the financial statements and periodic conference calls to discuss capital expenditure. We’re looking at every aspect of the business, positioning a company for sale, taking steps that will make a business as desirable as possible during the marketing process.

7. Confidentiality is critical

For convenience services operators, here is the bottom line regarding the importance of confidentiality when selling your business: It protects the value you’ve built into your business as it relates to customers, suppliers and employees. A loss of confidentiality can upset all three of those critical value components. I have seen it happen — it is not pretty, but it is completely avoidable.

8. How to market the company — confidentially

Here is the process that I recommend for marketing your company for sale. This is what VBB Advisors does, and it has always worked well for our clients. We distribute what is called a blind teaser, a one-page document with very high-level information. It doesn’t disclose specific geography or company name; instead, it only includes general information. It might look like this:

“Refreshment services business, Southeast US, here are the annual sales, here is the EBITDA data, here are some key general features. If interested, contact us.”

As interested parties come back, before we disclose any information, they sign a non-disclosure agreement (NDA).

9. Use an online portal for marketing materials

Once legitimate buyers have been attracted and vetted, they receive extensive, comprehensive marketing materials and information about the company for sale through an online portal. At this point, the seller’s early concerns are replaced by excitement, especially when it becomes apparent that multiple offers will soon be coming in. For the seller, it is an exciting time.

10. Make sure you have a true advocate on your team

After the marketing is over, once the buyer has been determined, sellers need an intermediary who serves their needs exclusively. We are passionate about being a sell-side broker exclusively. When it is time to negotiate the details of a deal, the seller needs to be able to trust the broker they are working with. A broker should not be working for both the buyer and the seller!

One thing we are dedicated to at VBB Advisors: We do not work both sides of the table. Everything we do is focused on generating multiple offers for operators when they decide it is time to sell their business.

I’ve said this before: it’s the most important business deal of their lives.