Feb 24, 2020
Today's episode of the podcast, Robert Hirsch from Freedom Factory discusses how to sell your business, a common question asked by business owners, to business brokers.
Listen to the podcast, watch the video, or read the transcript below.
Hi, Robert Hirsch from Freedom Factory here. And one of the questions that we get most often is, how do I sell my business? A lot of entrepreneurs, they ask this question. And I remember the first time I sold my business, I sold that through an investment banker in New York. And I learned this really important lesson.
Bankers don't speak entrepreneur and entrepreneurs ure don't speak banker. This was a different type of guy. He just wanted me to grow it and the way he sold it, and I'm not 100% sure, I think he called five or 10 guys that he went into business school with and his list of usual buyers., and he sold it to them. When I look back at it, I realized, I sold it way under what I could've sold it for, and I left a lot of money on the table. If I went back to do it again, that certainly isn't the way I would do it. So anyway, long story short, fast forward here and I've started three of the largest brokerages.
I've hosted a TV show on A&E and history on selling businesses, and all I do is help entrepreneurs sell their business. The number one thing that really drives the sales price is deal tension. Right? And so there's a couple of ways to think of it. One, you want to get as many interested parties as you can before you get into the LOI phase or the letter of intent phase.
Two, you want to get them to raise their hand at the same time, right? So if you have, if you have two buyers at the same time, they're going to be competing for your business and there's only one, and ultimately that's going to drive up the value for you and your business and your family. If you have two buyers at different times, that doesn't affect it at all, right? It doesn't give you, you know, the deal tension. If you have one guy or gal that wants to buy your business and you have another one three months later, that doesn't help you. So how do you run a process and how do you get buyers to fit to your timeline as opposed to you trying to fit to their timeline?
That's what an exceptional broker will do. They're going to create deal tension. They're going to get people interested. I'll give you an example. One of the things that we do is when we do a a month where we do questions and answers before we give any management meetings with the entrepreneur and what that does, let’s say a buyer sends in six questions and we send back 92 responses.
They say, well, why'd you send me 92 responses? I only asked six questions. Well, the answer for that is really simple. We want to give everybody the same information to put forth their best letter of intent or LOI, and it also psychologically readjust the buyer's thinking to understand that this is going to be a competitive deal.
They're not going to be able to steal your business. And two, there are other people interested and this is a valuable commodity. So our whole process is designed like that all the way through because anybody that's been doing this for any period of time is going to understand that time kills deals.
And what we want to do is drive it through. Have the buyers fit to our process and we want to run it as smoothly as we can. And that's why we do 147 day process here at Freedom Factory where most businesses, not all, it depends. Sometimes businesses are more complex or a little bit larger, but we really try and drive it through and 147 days, which is, pretty exceptional, when it can go from agency agreement to getting the biggest check of your life in five months. So anyway, I went in a little bit more detail on that, but specifically, finding the right broker is so critical. One other thing is some brokers are like real estate agents or transaction brokers.
They're going to represent both sides. They're going to represent sellers or buyers. At Freedom Factory, all we do is represent sellers. All we do is get the maximum price for the business. We don't represent buyers. We don't take both sides of a deal. We don't recuse ourselves. We just are in the entrepreneur's corner.
That's the reason that we get up every day. So a couple of other quick questions on selling your business. How do you find a buyer? And I'll tell you a little bit about what we do. We advertise through 27 different channels online, which is good. We go through all the databases.
We find strategic buyers. We do an outbound campaign, and we synchronize that to the inbound campaign. But we also do a marketing campaign for your business. We put together a video, a sizzle reel. We put marketing dollars behind that and we get as many people interested as we can.
One other quick question, right? So let's say we go through the process, we create deal tension. We get you an LOI that you're ecstatic with. And ultimately you control the deal. You control whether it makes sense for you or not to sell it. But a lot of entrepreneurs say, how do I know if I'm doing it right?
Maybe my contracts and you get into the nitty gritty and the contracts are one of those things that if you haven't seen a lot of them, either a stock purchase agreement or an asset purchase agreement, if you haven't seen a lot of them, there's a lot of little things that can kind of sneak in there that really affect the sales price.
And that's why you want an exceptional broker in your corner. That's why you want someone, and again, I'm not an attorney, I see a lot of contracts. We certainly recommend using a transaction attorney, but also we can understand what standard, what's not, what's typical, what's atypical. And we can point that out to you.
And as you go through the negotiations, part of it isn't just finding the highest price. Part of it is finding the perfect fit. And what I've found is the more people that are interested, then the more letters of intent you get, then it allows us to define just the right buyer and allows us to find the perfect fit for you.
So if we can help you out with this or anything else, please give us a call at Freedom Factory. Please hit like and subscribe. Thanks for watching and we'll see you soon.
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