Mergers & Acquisitions Advisory

A Neumann & Associates, LLC

August 8, 2011

The Three Popular “Myths” Of Selling (Or Buying) A Business?

By Joseph Eneldas

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Over the past ten years our firm has been involved in many discussions with business owners considering the sale of their businesses. There are a few particular myths that have repeatedly surfaced during these discussions.

“A typical business owner will sell a business only once in his or her life, and as a result typically underestimates how complex the process is. This understanding is crucial to a successful business transfer” says Achim Neumann, President of A Neumann & Associates, a leading New Jersey Business Brokerage firm in Atlantic Highlands.

Myth #1 – I Can Sell My Business Myself

Many owners believe they’re qualified to sell their business without professional assistance based on the skills they’ve acquired running their companies. Many owners are entrepreneurs with solid selling skills, and many function as the key salesperson for their company. However, what many don’t anticipate is that selling a business is nothing like selling a product or service.

“If you’re looking to sell on your own, confidentiality is immediately lost” says Neumann. “If word of a potential sale gets out, there are definite risks. You could lose clients, employees and favorable credit terms with banks— not to mention managing potential landlord questions.”

More importantly, business owners must ask themselves: is there really sufficient time to run a business while compiling marketing materials, advertising, screening many buyers (and tire kickers), and giving tours? On top of all of this, do you have the time and wherewithal to negotiate a comfortable deal—an adversarial process by nature—plus facilitate due diligence?

These are important considerations strewn with nuances, and all are time-consuming requirements that directly impact the selling price of a business.

Myth #2 – I Know What My Business is Worth

When self-evaluating the value of their business some owners want $100,000/year for sweat equity or will base their price on what they personally need for retirement. Others utilize “industry multiples,” most often some nebulous concept of EBITDA. Yet others just pick a number out of the air.

“None of these self-derived values will carry any credibility whatsoever with the buyer” says Neumann, “nor will it help the buyer’s bank to provide acquisition funding at closing.”

A third party appraisal by a national valuation company is the only solution to a solid understanding of a company’s growth potential, not some vague industry average. It’s surprising, but not uncommon how many business owners expect a buyer to pay several million dollars for their business, yet are not prepared to spend a few thousand dollars for a qualified third party opinion.

“A seller will instantly lose all credibility with any buyer by not being able to present a properly prepared package that includes a comprehensive company appraisal” says Neuman.

Myth #3 – Selling a Business is Like Selling a House

Preparing to sell a house takes a couple weeks, and then word of the sale is spread as far and wide as possible. Once a satisfactory offer is received, the keys are turned over and the seller moves on. No confidentiality, no pre-qualification, no detailed marketing package, no transition time, no seller note.

Selling a company, however, is much more complex. A successful business sale requires a great deal of pre-planning, valuation, cash flow recasting, document preparation, buyer evaluation and so forth.

It takes three to five times as much time to sell a business as it takes to sell a house. And even after the business is sold, the seller can be expected to stay on for at least several months helping the new owner to succeed with the business— thereby securing payback on the note extended to the new owner.

“Sound sale strategies will bring the seller the optimum price the market will bear,” says Neumann. “However, for business owners wanting to cut corners there is a price to be paid, particularly in this competitive environment!”

Achim Neumann is president of
A.Neumann & Associates, LLC
Atlantic Highlands,
an affiliate of BBN, Dallas, Texas, with 450 offices nationwide.

Visit the firm at www.neumannassociates.test
or call 732-872-6777

About A Neumann & Associates, LLC

A Neumann & Associates, LLC is a professional mergers & acquisitions and business brokerage firm having assisted business owners and buyers in the business valuation and business transfer process through its affiliations for the past 30 years. With an A+ Better Business Bureau rating, the company has senior trusted professionals with a deep knowledge based in multiple field offices along the East Coast and has performed hundreds of business valuations in its history. The firm’s competitive transaction fees are based on successfully completing transactions. For more information, please contact A Neumann & Associates at 732-872-6777 or info@neumannassociates.com

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“Your vetting is simply outstanding, among the best I've seen from a broker.”

Eric H., Investor

“I recently contacted A. Neumann and Associates about getting a valuation of my business done. I spoke with Marc, who explained the process in detail. After meeting with Marc in order to get a clear understanding of my business, and what I was hoping to accomplish. His patience in answering all my questions and his knowledge of the proper way to market my business gave me great confidence that this is the firm I will be using to sell my business for max value. Working with Marc at A Neumann & Associates was very easy and professional. I did not know all that was going to be involved in selling my business but they helped me through the process. What I thought was going to be a just another one of those pushy sales companies was just the opposite. Polite, knowledgeable, and a pleasure to talk to and deal with. I highly recommend this firm to anybody who wants to sell now or down the road. Marc not only knows his stuff, but actually is a real nice guy.”

Double Diamond

“Used A Neumann & Associates to sale my business. could not imagine having done it with out the patience and experience Gary provided. Thanks Gary,”

Dennis Frazier

“Working with Marc and his company was a pleasure. What I thought was going to be a just another one of those pushy sales companies was just the opposite. Polite, knowledgeable, and a pleasure to talk to and deal with. Marc handled most of the interaction and he has one of the greatest demeanors. Again, it was a pleasure working with him and his firm.”

Douglas DiCeglio

“I recently completed an acquisition using A Neumann & Associates. Tony Valentino was very helpful and accessible during the entire process. They do a thorough job vetting both parties and got us to the finish line.”

Srini Mudambi

“Claus out of Florida helped us with the sale of our business. We had never done anything like this and him and his team walked us through the process from start to finish. We had some challenges through the process and Claus continued to show up even in the difficult conversations.”

Colby Harris, Co-Owner, Del Mar Designs

“Claus Madsen thoroughly helped us with selling our company. From the 1st introductory meeting explaining to us what was possible, to providing us with resources to assist with the sale. Claus was invaluable throughout the whole sales process. Claus was with us every step of the journey and always made himself available for any questions or issues that came up along the way. If you are interested in selling your business, I encourage you to reach out to Claus and the ANA team so that they can let you know what’s achievable. These guys will make it happen!”

Ron Harris, Co-Owner and Vice President, Del Mar Designs

“A Neumann & Associates is the only business broker I would use or consult with. They have assisted with 3 business sales over the past 15 years with me. They are honest and sincere and have always performed better than my expectations. They are the only one i would use for the sales of my businesses.”

James Belanger, Business Owner

“I wanted to take a second to commend the exemplary customer service from both you [Karin Neumann] and Mr. Valentino. It’s both a rarity in the industry, and very much appreciated.”

Andrew G., Investor

“We worked with Neumann & Associates to investigate the purchase of a research company in 2010 and found Achim to be capable, forthright and realistic. His depth of experience enabled us to fully understand our options, offering creative options that might enable the acquisition. While we didn’t acquire that particular company at that time, we know exactly who to call whenever we’re looking to buy or sell a business.”

Daniel Coates, Buyer
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If you are considering selling your business, please contact us to learn more about our comprehensive service spectrum. Our experienced professionals will answer all your questions about selling a privately held business in complete confidentiality. Please fill out our contact form, or call us at 732-872-6777. We will contact you directly and will never identify ourselves to your employees.

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