I got an email yesterday from a friend who is looking for someone to help him sell his business. I have found intermediaries (mergers and acquisitions professionals or business brokers) to be a valuable resource for selling a business (and preparing it to be sold). In the video above, I share my experience with how to find an intermediary to represent you and what you’ll need to pay them to help you sell your company. Please use the comments section of this blog to share your own experience with finding and working with a business broker or M&A pro.
On a separate note, I found out this morning that my book Built To Sell has been recognized by Inc. Magazine as one of the top business books of 2010. I’m still peeling myself off the ceiling. A great big THANK YOU to you for reading the book (and this blog) which I know helped the editors at Inc. make their choices.
Finally, here are some new articles for this week about selling your business:
Three tips for negotiating your earn-out
~ published November 30, 2010
The other day I met with two entrepreneurs running a $1-million per year graphic design business. They were in the final stages of negotiating a deal to sell their company to a large multinational marketing services firm. »more
The mercenary vs. the missionary entrepreneur
~ published December 1, 2010 Globe and Mail
Do you have a purpose in your business that goes beyond making money?
• Harley-Davidson’s mission is to “fulfill dreams through the experience of motorcycling.”
• Southwest Airlines is trying to “democratize air travel so that all Americans can visit a loved one or relative at a happy and sad time in their lives.” »more
How to get employees to care
~ published December 2, 2010 Globe and Mail
To build a valuable company you can walk away from – whether to sell or to leave just for a vacation – requires that you figure out how to get your employees to care as much as you do.
For his advice, I spoke to Ken Blanchard, whose books, including Raving Fans and The One Minute Manager, have sold millions of copies worldwide. »more
Ready to Sell Your Business? Avoid These 8 Mistakes
~ published December 2, 2010 BNET
Are you planning to step away from running your business in the next few years? Here are eight mistakes to avoid before hitting the eject button:
Mistake 1: Being boring
While it is true buyers like predictability, they also like growth. Set aside a small slice of money for experimenting on new things (product ideas, etc.). »more
Solid, practical advice here as always, John.
But I think you overlooked an alternative source of M&A professional help available and affordable for companies with $10 million in revenue and above. The plug-in / bolt-on resource I am talking about is:
- a ‘true’ CFO
[Someone who you can sign-up on either a part-time, interim, project or full time basis as needed & appropriate.]
To be clear here, I am not talking about some typical bean-counter controller with an internal focus and an overblown job title but rather a finance and financing professional with a market/external-stakeholder/transaction focus who may or may not be a profession accountant.
From personal, mostly in-company experience where I have negotiated and close more $2.5 billion in major corporate finance transactions, too many Investment Bankers and M&A professional types just want to stick their lipstick on your ‘pig’ rather than help you craft your business situation and communicate your transaction opportunity in such a way as to make sure you get a maximized exit valuation and a great deal done.
Tony Johnston, CGA, CMC, MBA (Finance), BA (Economics)
President
Compass North Inc.
http://www.CompassNorthInc.com
> delivering results management & transaction advisory services that help companies get MORE: sales / profits / cashflow / financing / exit valuation
Tony: great addition. Where can business owners find a “true CFO” in your experience and what should they expect to pay as a fully loaded salary?
I think you both are on target and that business owners need to have relationships with these types of advisors the problem is they typically start way to late in the life cycle of the business. I think business owners need to have someone that can get all the trusted advisors in alignment with the business owners macro objective. That means they have to have one. Myself as a former business owner never really learned how to leverage the trusted advisor team of professionals that I was paying every year and none of them banker,cpa,attorney,insurance person and financial planner ever had a proactive conversation about exit strategy. So when we received the offer we couldn’t refuse because we ran the business as a business we did well on the sell price but man did we get hurt on the tax side because of lack of planning. We had this notion that we would pick our spot and we controled when it would be time to go. Big mistake! Alignment to a macro goal personally and business wise would have prevented the unnecessary transfer of dollars at time of transaction to taxes. So yes the business owner needs to have the right trusted advisors on the bus but just because they are on the bus doesn’t mean they are working outside of their silo’s on your behalf.
Tim:
How many months / years before selling would you recommend business owners cultivate a relationship with an intermediary?
In response to your question about where business owners can find a “true CFO” and what should they expect to pay on a fully loaded salary basis, I offer the following:
Compensation:
- Non-full time: $80 to $150 per hour fully loaded cost plus possible bonus of between 1% to 3% on transaction close and/or 0 to 20% on milestone accomplishment (this is definitely cheaper than what an Investment Banker or M&A Firm Professional will cost you in work fees for possibly the same or similar work product!)
- Full time: $125,000 to $225,000 fully loaded cost (or even higher for a big Co. CFO superstar) plus 0 to 30% bonus on discretion or transaction or milestone accomplishment (this cost typically would be on top of the cost of your bookkeeper and/or controller)
Where to find a “true CFO”:
I strongly believe business owners are best served when they get a finance and financing professional with accounting credentials on board with whom they can form a (temporary?) win/win business partnership. So, here are my (slightly self-serving) recommendations about how they can go about doing that, set out in prioritized order:
1) Contact my firm Compass North Inc. or one just like it – we either have the “true CFO’ talent you need in house or we can help you find just what you need all at a reasonable consulting charge-out rate
2) Contact the Financial Executives Networking Group who have more than 38,000 senior finance people as members throughout the US, Canada and elsewhere > go to their website at http://www.theFENG.org to post your job opportunity online having registered as a corporation or approach your local Chapter Chair or Matt Budd, the FENG Chairman, to ask them to circulate your opportunity to qualified candidates via email
3) Use a local Head-Hunter but make sure they know you want a “true CFO” and that you want to review all resumes of anyone they find in the ‘promising / accomplished’ category so you can pick who you will meet as opposed leaving it to them to select the supposed ‘top 3 to 5 candidates’ you should get to see (heck, they didn’t find you your spouse I bet – you did, so why should they be telling you who’s Mr. or Ms. Right for you to partner with!).
And for anyone with questions on this, I invite to contact me by phone or email. My contact info can be found at http://www.tonyjohnston.biz/tjcontact.html.
Hope this helps.
Tony Johnston, CGA, CMC, MBA (Finance), BA (Economics)
President
Compass North Inc.
http://www.CompassNorthInc.com
- delivering results management & transaction advisory services that help companies get MORE: sales / profits / cashflow / financing / exit valuation
Thanks for these benchmarks on comp — very helpful
In answer to your question about ‘How many months / years before selling would you recommend business owners cultivate a relationship with an intermediary?’, I’d say minimum 1 to 5 years – the longer the better!
As well, Tim’s points above are really good, particularly the ones about the risk of advisors working in silos, the need to set-up for tax issues on exit, and the fact that most divestitures catch owners off guard at unexpected times. That’s why it’s savvy to treat your company like a truly disposable/marketable asset (i.e someone else already owns it or could at short notice). In this way you’ll live the Boy Scout’s motto to the max: ‘always be prepared!’
Tony Johnston, CGA, CMC, MBA (Finance), BA (Economics)
President
Compass North Inc.
http://www.CompassNorthInc.com
- delivering results management & transaction advisory services that help companies get MORE: sales / profits / cashflow / financing / exit valuation
thanks Tony, that helpful for sure.
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