LAST MONTH WE went over the highly-rated option of selling your signshop through a national franchise, the method I ended up using to sell my small business earlier this year.
There are other ways to sell your company that are more common, possibly better and definitely more expensive: business brokers or mergers/acquisitions firms.
In the interest of perfect transparency, I never contacted a business broker when considering how to sell my print/signshop. After discussing this action with the world’s best business attorney (what, you don’t have one? You should! A world-class business attorney is worth their weight in gold if you find the right one and leverage their skills while building a strong working relationship), I felt like this broker option should be the nuclear choice. If no other ways of selling the business were bearing fruit, I would contact a business broker.
Some reasons you might choose to work with a business broker when selling your sign company:
- Your financials aren’t in great shape, so you need assistance in cleaning them up and getting a valuation.
- You don’t have many contacts in your area to rely on for leads.
- You aren’t great at advocating for yourself or don’t have the negotiation skills needed to get the most value for your company.
- You can be sure that business brokers will maintain confidentiality — otherwise, they’d be out of business.
- Business brokers have expertise, knowledge, marketing resources and networks to help them quickly find potential buyers.
- You can “outsource” the heavy lifting with the sale while still operating your business.
- The broker will take you through the due diligence process, which can be onerous.
- Because broker services are fee-based, they have an incentive to get you the highest possible price for your shop.
- Leveraging a broker’s experience can lead to a smoother transition.
Working with a general business broker isn’t necessarily all sunshine and unicorns, my friends. Here are some potential pitfalls to consider:
- Number one is cost — typically, you will pay 5-10% commission for business broker services. This can eat a big piece of your retirement sandwich.
- Ceding control of the sales process to someone you may or may not know very well is both risky and scary.
- There are always potential conflicts of interest and differences of opinions about timing, valuation or other key issues.
- The broker is motivated to close the deal and get paid, which may lead to pressure on you to take a less-than-optimal offer and/or terms.
- It can take time to vet the right business broker, and you may not even find one you like, respect or trust.
- You might be forced to enter a long-term contract which could impede your future flexibility.
- A general business broker may have no idea about our particular industry, which can lead to issues down the line.
To help ameliorate some of the aforementioned downsides to working with a business broker, you can choose a business broker on steroids — that is a mergers/acquisitions specialist in the print/signshop space.
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There aren’t a ton of options. I found a handful when I Googled “Mergers/Acquisitions Specialists Graphic Arts Industry.” A couple of these are well-known in our industry, mostly through writing columns in industry-related publications as subject matter experts. You might even be on some of their mailing lists.
I contacted one of these companies early on in my quest to sell my shop, and received very helpful information that I needed whether I ended up using them or not. They explained the process very thoroughly and how they offer value.
Some benefits of using a Graphic Arts M&A specialty company over and above a generic business broker:
- They understand your business, as many of the advisors previously worked in our industry, so you won’t have to explain to a vanilla business broker what “wide format” actually means.
- They have a stable of ready buyers who are always looking for acquisitions and may be able to get you in front of a qualified buyer quickly.
- They have a proven valuation method to help you know what to reasonably ask for your shop.
You knew there’d be downsides, though, right?
- Size matters greatly to these firms and it’s possible that unless you are doing several million dollars a year in sales or have some super-secret specialized product or process, they won’t give you the time of day.
- The cost is tremendous, and when I say “tremendous,” I mean, woo boy, hold onto your hat and wallet, because these guys want to get paid big time.
- In my interactions with them, I found most of them to be “High and Mighty,” in that they consider themselves “above” the great unwashed whose shops are under $10 million per year.
I hope this continuing information is helping you narrow down the best way to look into selling your signshop. Next month, we will talk about selling out to the devil, I mean, to a local competitor.
Contact Paula at paula@paulafargoconsulting.com.
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