American Fortune Cautions Against The FSBO Trend To Sell A Business

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Brian Mazar, CEO of American Fortune Mergers & Acquisitions, cautions against the FSBO approach of selling a business, notes some common pitfalls, and reveals tips for those who choose to represent themselves when selling a business.

American Fortune's CEO

Many business owners underestimate the complexity of a business sale.

Brian Mazar, CEO of American Fortune Mergers & Acquisitions cautions against the FSBO approach of selling a business, notes some common pitfalls, and reveals tips for those who choose to represent themselves when selling a business.

Some might not be aware that just like a homeowner can FSBO their home, so can a business owner FSBO their business. In either of these scenarios, professionals will vehemently argue for their services during a sale while owners list their bullet points for “going it alone.”

“Many business owners underestimate the complexity of a business sale,” quotes Mazar. A romantic-thinking business owner will envision quickly finding a buyer, exchanging funds and walking into the sunset with their earnings. “Not so fast. Not only is the process typically complex, but owners tend to use inaccurate business valuations and can easily fall prey to savvy investors looking for grossly undervalued companies,” Mazar stated.

There are two pitfalls owners want to avoid should they choose to sell a business on their own. The first is an owner’s tendency to go for the “Quick Sale.” “With this state-of-mind,” quotes Mazar, “an owner may eventually sell their business but often overlook some valuable aspects of the deal.” For example, a company’s business valuation might be inaccurate which could mean selling for thousands of dollars below what it’s worth. Inaccurate valuations also increase the risk of selling to a bottom-feeding buyer who will utilize great negotiation tactics to obtain favorable terms and a great purchase price. Additionally, if the structure of the deal is not meticulously reviewed, owners may unwittingly leave themselves legally exposed which can come back to haunt them in the future.

Then there are those FSBOs who languish on the market with their business offered for sale at twice the actual value wondering why no buyers are showing-up. With the sale looming somewhere in the future, “employees start to leave as they begin to worry about the company changes, their job stability and new management,” says Mazar. With no offers in site, owners tend to spend increasing amounts of time focusing on why their business is not selling. The business then begins to suffer which can include declines in revenue, morale and growth: not a good recipe for selling a business.

“Investing the time and money in a quality business valuation can make all the difference in the sale’s success,” says Mazar. “The initial preparations will take time, but an accurate business valuation that accounts for all aspects of the business will keep thousands of dollars in an owner’s pocket.” Mr. Mazar recommends using a firm that is actively involved in the day-to-day business of business sales, preferably a mergers & acquisitions firm. Many accounting firms also offer business valuations but Mazar notes, “they often do not have an in-depth understanding of market forces or industry trends.”

Accurate valuation in hand, the decision must then be made to FSBO or hire a company to sell the business for you. To make this decision, educate yourself. Find out what it takes to successfully sell a business. Speak with professionals you trust. Call around. A good firm will at least offer some advice regardless of their involvement in the sale. Be sure to understand the importance of confidentiality, a thorough and controlled process, how to properly screen qualified buyers, the due diligence process and how to predict future problems and be able to offer solutions to a potential buyer.

Then take a good, long look at your time resources. As a FSBO, be prepared to dedicate 10-15 hours per week for up to two years. This time will be used to advertise, find buyers and screen them, understand tax implications, structure a deal, conduct due diligence, negotiate and legally protect yourself and the business. If these tasks seem overwhelming, perhaps a FSBO is not the way to go and you may consider a mergers and acquisitions firm. Firms whose core focus is the buy/sell process are your wisest choice. “They are experienced in providing advisory services and their resources typically run deep,” Mazar stated. “Find a firm that clearly and realistically presents extensive information and explains different choices along with the outcomes of each.” Then, adds Mazar, “stop, listen and ask more questions.” When a firm offers their time to help you feel confident and comfortable with all aspects of a sale, that will be the firm for you.

American Fortune Mergers & Acquisitions, LLC is a nation-wide firm that provides services in the areas of growth-to-exit planning, mergers and acquisitions and business valuations for businesses with revenues between $3 million and $100 million. American Fortune was founded by industry veteran Brian S. Mazar who developed a unique buying process that is sell-side driven. Due to this process, American Fortune successfully sells their businesses at an average of 98% their listed price

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