The first major myth Miller explores is the idea that the “negotiating is over once you sign the LOI.” The letter of intention is, of course, important. However, this is by no means the end of the negotiations and it is potentially dangerous to think otherwise. The negotiations are not concluded until there is a purchasing agreement in place. As Miller points out, there is a great deal that can go wrong during the due diligence process. For this reason, it is important to not see the LOI as the “end of the road.”
Another myth Miller highlights is the idea that buyers should take seller paper, or debt from the company, as part of the purchase price. In reality, experts like Miller often advise buyers not to take on seller financing, meaning it’s usually better to avoid paying for the business through loans provided by the seller. This can be a risky strategy and may not always be in your best interest.
A third myth that Miller explorers is a particularly dangerous one. The idea that everyone who makes an offer has the money to follow through is, unfortunately, simply not true. Oftentimes, people will make offers without securing the money to actually buy the business. No doubt, this wastes everyone’s time. As the business owner, it can derail your progress. If you are not careful, it could actually prevent you from finding a qualified buyer.
Another myth is built around the notion that sellers don’t need a deal team in order to sell their business. Again, this is another myth that has no real foundation in reality. While it may be possible to sell your business without the assistance of an experienced M&A attorney or business broker, the odds are excellent that doing so will come at a price. According to Miller, those working with an investment banker or business broker can expect, on average, 20% more transaction value!
Additionally, there are other dangers in not having a deal team in place. A business broker can handle many of the time-consuming aspects of selling a business, so that you can keep running your business. It is not uncommon for business owners to get stretched too thin while trying to both run and sell a business and this can ultimately harm its value.
Miller’s final myth to consider is that you must sell your entire business. It is true that most buyers will want to buy 100% of a business, but a minority ownership position is still an option. There are many reasons to consider selling a minority stake, so don’t assume that selling your business is an “all or nothing” affair.
Ultimately, Miller lays out an exceptional case for the importance of working with business brokers when selling or buying a business. Business brokers can help you avoid myths. In the end, they know the lay of the land.
Photo by Andrii Yalanskyi from Getty Images
