The world economy is evolving in ways no one could have predicted even a decade ago. Auto manufacturers, grocery chains, and most other companies that started as brick-and-mortar businesses are changing the way they operate to online models, especially when it comes to marketing and sales.
Former Speaker of the U.S. House of Representatives Tip O’Neill famously declared, “All politics is local.” Is this true of selling a business as well? The internet has changed the way this industry works but has it affected how businesses are sold?
Does a broker need to know the local market to sell your business? Does being local speed up the sale process? Is a local network required to sell a business?
This article explains.
Table of Contents
- Is Being Local an Advantage?
- Does a Broker Need to Know the Local Market?
- Does a Broker Need Detailed Knowledge of Your Particular Business in Order to Sell It?
- Does Being Local Expedite the Sales Process?
- Are Local Connections Required to Sell a Business?
- When is Hiring an In-State Professional Necessary?
- My Personal Experience as a Local Broker
- Potential Disadvantages of Working With a Local Broker or Intermediary
- Other Industries Migrating to Virtual Operations
- How and Why Morgan & Westfield is Different
- Client-Centered Service
Is Being Local an Advantage as a Business Broker or M&A Advisor?
Let’s examine some of the myths associated with the local broker versus a national brokerage firm when it comes to selling a business:
Does a Broker or Investment Banker Need to Know the Local Market?
Reality: A broker needs to know how to market a business for sale and get that business in front of as many potential buyers as possible. Today, potential buyers are shopping online using industry web portals or contacting acquisition candidates directly. It doesn’t matter if the physical distance between the buyer and seller is three blocks or three thousand miles.
Does a Broker or M&A Advisor Need Detailed Knowledge of Your Particular Business in Order to Sell It?
Reality: While specialized knowledge of a client’s business or industry can be helpful, it is seldom the key element in making the sale. More important in this process are the ability to market the business, the scope and reach to potential buyers, access to financing, and technology to expedite the sales process. No broker will ever know your business as well as you do. Selling your business is a team effort, and you are a critical element of the team. Morgan & Westfield capitalizes on your knowledge of your business. We structure our transactions so that we function as the process expert, and you function as the subject-matter expert for your business.
Does Being Local Expedite the Sales Process?
Reality: We have found that most local intermediaries have not embraced changes in the industry and, as a result, have less access to the resources that are now necessary to find and arrange the best transactions for their clients. We know local brokers who still use fax machines and require buyers to print, sign, and mail paper documents. Most businesses today are bought and sold electronically, documents are signed digitally, and transactions that once took weeks to close are now completed in a matter of minutes. At Morgan & Westfield, we handle digital transactions every day, and we will work with you every step of the way to make the sales process clear and straightforward.
Are Local Connections Required to Sell a Business?
Reality: Hundreds of thousands of small businesses now sell their products to a worldwide clientele because customers can find them anywhere there’s internet connectivity. Why limit your buyer pool to those within a narrow physical radius? Local connections are valuable when looking for a mechanic, plumber, or roofer. The same does not apply to finding prospective buyers. Networking now takes place in a virtual world that is global, vast, and which increases your sales potential exponentially.
When is Hiring an In-State Broker or M&A Advisor Necessary?
That said, there are a few situations in which hiring a local professional is necessary. For example:
- For certain types of business appraisals, a site visit may be required.
- Because laws vary by state, it may be necessary to retain an attorney licensed to practice in the state where the business is located.
- Hiring an in-state CPA is also recommended if your state has personal or corporate income taxes.
- If your state is one of the few states where the bulk sale statutes have not been redacted (e.g., California), we highly recommend hiring an in-state escrow agent or attorney (it’s not necessary to hire a local broker).
My Personal Experience as a Local Business Broker
I speak from experience.
I started out as a traditional local broker in Ohio, Nevada, and California for more than eight years before making the transition to a digital brokerage.
While working in Southern California, I was contacted by a golf club manufacturer in Northern California who wanted to sell his business.
I told the owner that I was in Southern California, so it would not be feasible for me to broker the transaction. He stopped for a second, sounding puzzled, and asked why I needed to meet with him. I had no idea what to say. I always assumed that the only way to do business was to physically meet with clients. That moment was a revelation. I stuttered, paused, then jumped at the opportunity. Within 18 months, I turned our business model upside down, and since 2009, we have operated 100% virtually.
I’m not alone. An associate sells $100 million-plus companies without ever meeting his clients. This evolution in our business forced me to question the utility and effectiveness of conventional industry standards. Many industries have moved past a brick-and-mortar philosophy and are embracing new opportunities in the digital marketplace, including mine.
In the nascent gig and digital economy, disciplines — and products and services — that once required brick-and-mortar stores and physical proximity are now just a click away.
Management, entrepreneurship, marketing, accounting, sales, psychology, and interpretation of financial statements are disciplines and resources now readily available in a digital environment.
Thanks to constantly advancing technologies, virtual offices now exist across the internet, lessening the need for the age-old requirements of members of a work team functioning in the same physical space.
Potential Disadvantages of Working With a Local Broker or Intermediary
- Competition: You are competing with the broker’s other local businesses for sale. If the broker is showing your business to a potential buyer, the broker has likely also shown that buyer dozens of other businesses in your immediate area.
- Commissions: Most local brokers work exclusively on a commission basis. Working with a broker on a commission-only basis can create bias because the broker knows they will not be paid unless the sale goes through. Such high stakes can result in corner-cutting and ethically suspect practices.
- Higher fees: Local brokers must charge higher fees to offset their travel expenses, along with overhead and other costs associated with a brick-and-mortar office.
- Fewer or lower-quality resources: Local brokers do not have access to the same level of resources as a firm with a national footprint.
- Less innovation/less technology: Working on a national scale requires advanced technology. Most local brokers have not made this investment.
- Limited scope of experience: Intermediaries who broker nationally are exposed to a wider variety of situations, deal types, and circumstances. This increases their knowledge base, resourcefulness, and pattern-recognition capabilities.
- Limited selection: In many cities, you will find only a small pool of local business brokers and M&A advisors to choose from.
Other Industries Migrating to Virtual Operations
M&A firms are not alone in migrating to the virtual world.
Companies specializing in customer service, information technology, healthcare, education, law, and other sectors are discovering the practical advantages of the virtual office.
A recent American Bar Association survey indicated that the number of law firms and solo practitioners offering legal services virtually is increasing. These firms understand that the marketplace — and clients’ needs — are changing and that by leveraging sophisticated technology such as cloud-based management tools and platforms, they can provide services on par with, if not better than, services offered to a client in person.
Virtual firms can charge lower fees than traditional firms by saving on overhead, eliminating most travel expenses, and reducing time expenditures by streamlining transactions.
This move to the virtual workplace is no passing fad; it’s a transition that the global business world is making.
How and Why Morgan & Westfield is Different
The benefits of using Morgan & Westfield’s brokerage services are many. Here are a few of the most important:
- Knowledge: Our collective knowledge of the business brokerage and M&A industry is broad and deep.
- Experience: We have participated in hundreds of successful transactions.
- Innovation: We are at the leading edge of the industry, thanks in part to the proprietary M&W 4-Step Method to streamline the sale of your business.
- Maximum exposure: The bottleneck of a sale usually occurs in the marketing phase — generating interest in the product or business for sale. We have pared this process down to a science.
- Technology: We use the latest technologies.
- Team: We have an extensive administrative support team to execute our controlled sales process.
- Network: We have an extensive network of highly specialized professionals, including escrow agents and attorneys, who focus on their areas of specialty and nothing else.
- Focus: Our exclusive focus is selling businesses.
- Protection: For your protection –- and our success together — we have stringent protocols in place for each step of the process.
- Independence: Morgan & Westfield is a boutique independent firm and not a franchise. We are beholden to our clients, not a corporate entity.
- No long-term contracts: We offer our services on an à la carte basis and customize our approach for every client. You only pay for the services that you want.
At Morgan & Westfield, we specialize in using the strengths of the digital age to work with buyers and sellers anywhere. If you are contemplating selling your business, consider the advantages of working with a firm that offers the best chance of finding a buyer.