Mergers & Acquisitions Advisory

A Neumann & Associates, LLC

March 4, 2022

Top 3 Owner Concerns When Selling a Business

By Gary Herviou

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If you are thinking about selling your business, you certainly have many things to think about.  The process of selling a privately held company is a unique experience and, if handled properly, can result in an extremely rewarding transaction that fully meets the goals of the owner and the firm.  Thoughtful planning and a proactive approach will result in an efficient sale of the business on your terms – a transaction that quickly maximizes financial return with the correct buyer in a professional and confidential manner.

As Achim Neumann, President of A Neumann & Associates, LLC. and one of the foremost respected M&A advisors on the East coast, says in his 2017 book entitled The Road Beyond – What Nobody Tells You About Selling a Midsized Business, “Whatever the ultimate motivation or timing is for the sale, what is most important is setting the planning into motion with as much lead time as possible – ideally, at least three to five years before the planned transaction time.  Within this context, a business owner will have many questions regarding preparation for the sale. These questions are essential to the owner’s ‘peace of mind’ thus determining, if he or she is ready to sell and motivated to commit to the process.”

OK, so what are the biggest questions that need to be addressed for business owners?   From many years of experience, it all comes down to “Three Big C’s” – Cash, Confidentiality and Continuity.  Let’s dive a little deeper into the 3 most prevalent concerns that business owners typically have as it relates to a potential sale:

  1. CASH – What is my business truly worth and how much cash will we receive at closing? – This is priority #1 for most business owners. In order to be comfortable with a sale, it is imperative that a clear deal structure be defined and supported before going into the market.  As a first step, a  proper accredited fair-market valuation should be performed and delivered to the business owner. The valuation should accurately identify sellers discretionary cash flow (or the true benefit of ownership on an annual basis) as well as the assets included in a sale. Based upon current market factors, the financial performance of the firm, and specific growth potential, an accurate value can be determined.

As part of the valuation, it is critical to have a formal company marketability assessment provided with it. This review will outline both the positive and negative operational factors that drive value and impact the relative attractiveness in the market from a buyer’s perspective. Items such as owner dependency, client concentration, managerial depth, financial record-keeping, recurring revenue, and potential growth opportunities all impact the marketability of a firm in the buyer’s eye. Bottom line is this – the stronger your firm is going into the market, the more cash you will receive at closing (as opposed to deferred dollars) and the stronger overall transaction can be attained.

The combination of a proper valuation and marketability review will directly influence what a final deal will look like – you need to know exactly how much cash will be delivered at closing and how much will be deferred in either seller note or performance-based scenario.  Once the details of a potential sale are defined, you need to see if that transaction will meet your goals – both financially and from a lifestyle perspective. The financial proceeds of a sale can be inserted into a financial plan and reviewed to see if cash flow will be sufficient for retirement or change of career.

  1. CONFIDENTIALITY – What is the process to discretely sell my business and meet my goals? – Unlike selling real estate where everything is out in the open and publicly marketed, the sale of a business should be completed in complete secrecy as best as possible. The last thing that business owners want is for key management, employees, competitors, or suppliers to find out that the company is for sale.  There is no need for them to know the intentions and suffer unnecessary anxiety about a possible change at the top. If done properly, an efficient sale can be executed without any breaches of confidentiality.

There is certainly a correct way and an incorrect way to sell a business and it is essential to collaborate with the proper advisors to implement the sale.  Professional marketing documents, access to the correct buyers, stringent buyer prequalification, expert negotiation skills, accurate financial reporting, and a thoroughly managed approach are all pillars of a successful and discreet transaction process.

  1. CONTINUITY – Will employees and customers be adversely affected by selling? – Beyond the financial aspects of a transaction, business owners are rightfully worried about the ultimate fate of key management, employees, and their valuable clients.  Powerful relationships inside and outside of the organization have been built over many years and the last thing an owner wants to do is jeopardize those for any reason.  The key questions that buyers will have to address surround their plans and intentions for the current staff post-closing.  The security of key people and the continuity of operations is a tangible fear of any transaction.

The good news is that most transactions that occur with privately owned companies involve no significant change to the current organization and its key people.  The reasoning is simple – the buyer is spending good money to buy goodwill built up over many years with an organization in place that is performing well and that is going to be required to grow the business into the future.  A proper transition with the current owner and preserving top talent is essential for any new ownership to meet their complete goals – this will certainly be the focus for at least the first 12 months.  The result is that there is very little change to employees, management, and customers coming out of a sale.

As Mr. Neumann adds, “Every business sale transaction is vastly different from what a business owner experiences on a daily basis in managing the business.  A business sale is completely different in its nature and will impose considerable stress on a business owner – even more so if the preparation was insufficient and the team involved inexperienced.”

Preparing for and deciding to sell a family or privately held business is a weighty exercise that calls for a thoughtful and proactive approach.  The execution of an efficient sale as described above is a complicated process that calls for experience, discretion, and professionalism. The legitimate concerns of a seller must be addressed.  Determining the ultimate deal structure with cash at closing defined, preserving confidentiality throughout the process, and maintaining the continuity of the organization are paramount priorities.  Proper preparation and an experienced M&A team will go a long way to alleviating any fears involved with a sale of the business.

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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“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.”

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“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

“Purchasing a business through this firm was a pleasure. Gary was very professional and transparent throughout the entire process. I look forward to working with A Neumann & Associates in the future.”

William Klemens, Buyer

“I utilized A. Neumann & Associates to assist in an M&A process. They are VERY thorough in using their time-tested process to calculate the value of investment opportunities, a process which provided a very detailed explanation for the value of the potential opportunity. Additionally, they also went above and beyond to extend other services including connecting with others who specialize in your industry and can assist with necessary steps including legal and accounting. Highly recommended!”

Edward Lane , Business Owner

“I recently contacted A. Neumann and Associates about getting a valuation of my business done. I spoke with Achim, who explained the process in detail. He had his colleague Gary come to my office 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 when the time comes for me to sell my business for max value. They gave me great insight into the steps I need to take now to get the best deal in the future. I highly recommend this firm to anybody who wants to sell now or down the road. They not only know their stuff, their actually just real nice guys.”

Robert Kardane, Business Owner
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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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