Our goal at Morgan & Westfield is simple: to help you successfully exit your business. Here are answers to some of our most commonly asked questions.
Can my accountant adjust or normalize my financials?
Most accountants are not familiar with the types of adjustments that are typically allowable in the actual marketplace by buyers. The individual responsible for normalizing your financial statements should have real-world experience selling businesses and should be familiar with the types of adjustments that buyers find acceptable.
Do I need an attorney?
If your buyer is a larger competitor or private equity firm — or if the buyer’s attorney prepares the letter of intent and purchase agreement — you should have an attorney on standby or retainer to review the key documents. To be sure, Morgan & Westfield is actively involved in the negotiations of these key documents on your behalf, but we are M&A experts, not attorneys — and it’s attorneys who are best suited to review the finished product from a legal perspective.
On the other hand, if Morgan & Westfield drafts the offer and purchase agreement — which is what generally occurs when the buyer is an individual or small competitor — and the buyer makes or suggests only minimal changes to our drafts, you may not need an attorney. In fact, many transactions successfully conclude without an attorney.
Individual buyers or small competitors will often allow us to prepare the key documents. After all, they, too, would prefer to avoid a lawyer’s fee, if possible. And in any event, you can always have your attorney review our drafts if you feel that’s necessary.
How do you handle buyer meetings?
You are the best person to show your business. The countless hours you have invested put you in the best position to answer buyers’ questions. You know your business from the inside out. If the buyer requests to see your business in person, we will arrange for the buyer to contact you to schedule a face-to-face visit.
Do you market my business locally?
Yes. We target your business’s advertising for the most effective result, which includes digital marketing and online lead generation, both to local and out-of-state buyers, and direct contact to other potential acquirers.
Do I need a Teaser Profile?
It depends. The Teaser Profile is one piece of the overall marketing strategy that we can develop for you. It is important to confidentially market your business using various media such as online media, trade publications, newspapers, and other forums to reach potential buyers. The methods used will vary depending on the size of your company. If your strategy involves contacting competitors, the best way to quietly put the word out, while still maintaining your confidentiality, is to contact potential acquirers directly using the Teaser Profile.
Are upfront fees bad?
No. Upfront fees should not be charged if no service is being provided. For example, if an advisor requires a $5,000 retainer fee and does not provide any specific service for this fee, then it is not recommended.
However, the truth is that the more experienced the advisor, the higher the likelihood they will charge upfront fees, especially if they invest a significant amount of time preparing and packaging a business for sale. Most M&A advisors invest substantial time preparing and packaging a business for sale, and they are reluctant to do so without being paid upfront for their expertise. Most business brokers make the claim that upfront fees are objectionable. They avoid them because they don’t have the processes and staff to provide enough value to justify charging upfront fees. They would be singing a different tune if they could justify charging upfront fees by offering something of value in return.
Why are your fees less than other firms?
There are three primary reasons:
Once I have found a buyer, should I take my business off the market?
No. You should always keep your business on the market unless you have agreed to an exclusivity provision in the letter of intent or offer. Keep marketing your business until your sale is complete. If your business stays on the market, you maintain your negotiating advantage and leverage over the buyer. This minimizes the chances of the buyer using tactics at the last minute to reduce the price (called “retrading”), which is a common tactic.
If you don’t require a contract, then what am I ‘canceling’ when you say I can cancel at any time?
You can cancel the marketing service, which requires a monthly fee, at any time. We only require an agreement, not a long-term contract. This agreement is simply an outline of our responsibilities and does not require a long-term commitment.
Can I cancel anytime?
Yes, you can cancel anytime. We do not require long-term contracts. There are no penalties for canceling. Refunds are prorated based on the work completed.
If you don’t require a contract, then what am I ‘canceling’ when you say I can cancel at any time? You can cancel the marketing service, which requires a monthly fee, at any time. We only require an agreement, not a long-term contract. This agreement is simply an outline of our responsibilities and does not require a long-term commitment.
I am worried about confidentiality. How is my confidentiality protected?
We do not disclose your confidential information to buyers without a signed confidentiality agreement. Information about your business is shared with potential buyers in measured stages only as their level of interest heightens, and the transaction unfolds. This phased release of information helps maintain confidentiality to the maximum degree and helps ensure we are negotiating with earnest buyers.
Do your fees include escrow and attorney fees?
No. Any additional advisors you choose to consult, such as your attorney, accountant, and other third parties will be your responsibility.
Why are your fees different for the type and size of business?
Fees for Steps 2 and 3 vary because each transaction is customized from business to business. Fees are determined by the type and size of business, the industry, the marketing strategy, and the number of services you choose to utilize (e.g. Teaser, Financial Assessment, Targeted Campaigns, etc.). Some business owners prefer we take a limited role and select a limited number of services, while others request that we do everything from A to Z.
Do you have a buyer database?
There is a common expectation that firms have a database of buyers to tap in order to sell a company quickly. However, this idea can be misleading. The notion of a database of buyers as a sales tool is often overstated and exaggerated. In fact, very few buyers are generated from a firm’s list of contacts since few firms actively market to their database beyond sending out mass emails with a list of their businesses for sale. They may send updates about all of their active listings, but this is not the same as one-on-one targeted marketing. The best way to sell any business goes well beyond any static listing of names in a database.
Can you provide a proposal before completing an assessment of my business?
No. Submitting a proposal without conducting a full assessment (Step 1) of your business sale would be a disservice. Some clients we work with require minimal preparation (Step 2) and an entirely different marketing strategy (Step 3) for the sale of their businesses; others require extensive preparation and a more labor-intensive marketing strategy. Our Assessment (Step 1) allows our team to accurately review and analyze your business’s needs in order to provide you with a suitable strategy and an itemized list of the services we recommend for Steps 2 and 3, along with their associated fees. Once we have performed the assessment, you are assured that we will be in a much better position to make sound recommendations while avoiding unnecessary work on your end. Ultimately, this will allow us to help you maximize the purchase price for your business while minimizing the professional fees.
How does the credit for the Step 1 Assessment work?
You receive a 100% credit of the cost of the Assessment toward Step 2 of our process if you move forward with us within 30 days of completion of the Assessment. No long-term contracts are required.
Why did you design the Morgan & Westfield 4-Step Method?
The short answer is that our clients drove us to create this method. We designed this process after listening to clients complain that the existing model for selling a business is broken.
Is a ‘broker network’ important?
No. The “broker network” myth has been perpetuated within the industry without regard to its effectiveness. Talk of the broker network advantage is an attempt to be a point of differentiation compared with independent firms. Studies have found that 97% of buyers come from outside of broker networks anyway, so why focus on an advantage that only generates 3% of buyers? We focus on finding the right buyer for the right company through wider networks than a mythical broker network.
How is selling a business different from selling a house?
Selling a business is infinitely more complex than selling a house and takes significantly longer. Real estate is primarily tangible, whereas a business consists of intangible assets. Selling a business also has a much lower success rate, with many transactions failing during due diligence.
You may be able to sell your house in as little as one to six months. Selling a business, by contrast, takes six to 12 months or longer, on average. Financing is also more difficult to obtain for the acquisition of a business. All of these factors combine to make selling a business much more complex and time-consuming than selling a home.
How does selling a business work? How has the industry changed in the past 10 to 20 years?
This is a small industry, with only about 3,000 to 5,000 brokers nationwide. The typical broker or M&A intermediary tends to be a conservative solo-operator in their mid-fifties, less willing to take risks, and with a more short-term view of what is left of their career. They are also more likely to have an approach to selling a business that has not changed much in the past 20 years.
Highly-driven, talented experts migrate to more significant $100 million+ dollar deals, knowing that the way to make more money is to sell larger companies since there is a limit to how many businesses one person can sell per year. It takes as much effort to sell a $10 million business as it does a $100 million business. Most start by selling small businesses and graduate to larger transactions as soon as possible.
Due to the low barriers to entry in this business, many types of salespeople tend to join the industry, bringing with them a sales background rather than a business background. There is little-to-no formal industry training, and the business processes have not changed much, even with rapid advancements in technology outside of the industry. Few are committed to investing their money in innovations since their income and commissions are unpredictable. Whereas industries like technology and bioscience attract angel investors and venture capitalists, this industry does not.
A serious commitment to innovation requires investment, driven talent, and a long-term time horizon. These are rare traits in the industry, but at Morgan & Westfield, they’re the rule rather than the exception.
At Morgan & Westfield, we employ the latest technology and draw on a large stable of experts in a wide variety of disciplines to get the job done. The proof is in our track record.
Why do others require a contract, but not Morgan & Westfield?
Most brokers require a contract because they work on a commission-only basis, meaning they don’t get paid unless they sell your business. They will be hesitant to invest the necessary time upfront to sell your business if they aren’t certain of getting paid for that time. For this reason, they have clients sign a contract that commits to working with them exclusively for a period of time, typically one year or more.
Can I trust a firm’s claims regarding its success rate?
Generally not. It’s common for some advisors to quote success rates, but these can be misleading. The success rate is difficult for any firm to track accurately. Anyone that claims a specific success rate but does not provide details for how that number is calculated is undoubtedly misleading you.
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