You feel you’ve worked hard and long, and based on what you hear from your colleagues in the broker ranks, your brokerage is now worth a lot of money! Yes, brokerages are selling for 3 to 4 times revenue!
Over the years, you’ve thought that internal perpetuation was the way to go. But it takes 5 years or more to position for internal perpetuation, and you’ve just been too busy to do that.
Well, the good news is there are numerous potential buyers with deep pockets. But these are very astute potential buyers, so you need to do some things to maximize the price they are willing to pay.
Here’s our list of 7 Action Steps to Maximize the Value of your Brokerage:
1. Have a realistic expectation for the value of your brokerage
Vendors almost always over-value their businesses. Remember, a business is only worth what a willing, informed buyer will pay. So, don’t fixate on a value based on cocktail party chit chat with friends who have sold. We suggest that you have a proper valuation prepared and complete an objective brokerage performance assessment.
2. Be really clear on your end-in-mind
Do you want to walk away on the day the deal closes? Or do you want to keep an active role in your brokerage after the sale? When was the last time you had a boss? What if you discover you’re a lousy employee halfway through year 1 of a 5-year earnout? How will you exit?
3. Do your own personal tax planning before you start talking to potential buyers
Get good personal tax advice and follow it – don’t be trying to make these decisions in parallel with negotiating with a potential purchaser. You’ll only frustrate the buyer and increase your stress.
4. Do your housekeeping
The potential buyer’s due diligence will leave you stripped naked at noon in the centre of town! So, tidy up your finances, disentangle your personal and business financial affairs and, if there’s a skeleton or two in the closet, deal with it and explain it to your buyer. They’re going to find out anyway!
5. Select your advisors wisely
The accountant and lawyer who have served you well for many years may not have the expertise or skill to handle the biggest financial transaction you’ll ever make. You need experts – the best you can hire.
6. Understand that going through the sale of your business will be a long, gruelling experience.
Meeting the potential buyers needs for information and answering their seemingly endless questions will take an enormous amount of your time. And they will want answers NOW! Plus, you have a business to keep running. Psych yourself up!
7. Allow your advisors to conduct a comprehensive search for potential buyers
One of our clients received an eye-popping unsolicited offer for his brokerage. He was tempted to accept, but fortunately he said “Wait a minute! I wonder what we would discover if we took our time and conducted a full-blown market search?” Two years later, he sold for 40% more than the unsolicited offer!
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If you would like more information regarding maximizing the value of your brokerage, or if you’d like to discuss your other options, click here to set up a Discovery Conversation with one of our Coaches.