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When is it Time to Sell a Business?
In the life of many business owners, there will be a moment when you realize that you could make some money if you decide to sell your business. How...
3 min read
Sunbelt Marketing : Jan 16, 2018 12:00:00 AM
Selling a business that generates 5 million and under 10 million in revenue? Here is how to find the best brokerage firm to represent you when you live in “No Man’s Land”. Companies with sales of between $5 million, but under 10 Million annually may struggle with where to turn for assistance.
In the brokerage and investment banking industry, companies for sale with annual revenues of between five and ten million have “affectionately” been dubbed, “No Man’s Land”; too small for many strategic buyers and private equity firms, too large for a financial buyer. This is why as you think about exiting your business, you will find that many brokerage firms specialize in either very small companies with annual revenues less than $1 million, or larger businesses with revenues well in excess of $10 million. So,what’s a small to mid-sized business to do? You still need representation.
When You’re Not Small and You’re Not Medium
When you are business with between $5 million and $10 million in annual revenue, your business is just on the edge of small and medium-sized. Brokers may not advertise to this market as much, but that doesn’t mean they’re uninterested. You don’t have to pick a broker who’s advertising their services for a business of your specific size or revenue. Simply look for the best fit. Begin your search by reaching out to 10-15 candidates. The wider your net, after all, the more likely it is to return a good catch.
How to Choose Your Broker
When you begin your search for a broker, you must first have a keen understanding of what the relationship entails. Your broker will be intimately involved in the sale, and in the operation of your business so someone who understands your industry is best, certainly, but don’t get too fixated on industry expertise. More importantly, you need a good Deal Maker; someone who knows how to sell businesses as well as you know how to run your company. Good business brokers know how to market a wide range of businesses. A firm with a group of Deal Makers with varied backgrounds that collaborate regularly as a team can be more beneficial than going with a firm that has a singular focus. A singular focus can lead to tunnel vision.
You also need a firm that can assure confidentiality while reaching a broad market. You need a firm that is upfront about fee structures and if they charge retainer fees, the agreement should clearly define how the retainer fee that you pay will be spent to market your business.
It can feel overwhelming at first, but a good broker helps you navigate the sale from start to finish and can command a much higher selling price with more favorable terms than you would typically get on your own.
Here are some questions and things to look for as a seller of a company that falls into “No-Man’s Land” should ask as they interview prospective firms:
Businesses that generate between $5 and $10 million in revenue can be taken to market as a small business or as a lower middle market business and to reach as many prospects as possible, they may need to be marketed to reach both types of buyers. A seasoned deal maker with experience in both small and lower-middle market sales will be able to determine which approach will be the best approach for you situation and will be able to provide you with a clear marketing strategy and timeline for getting the highest value for the business you have built.
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