What is your background and that of Quiet Light Brokerage?
Both are intertwined…I’ve been an entrepreneur since 2002 when I had a previous web business and decided to sell. That process was frustrating at best, took longer than I was lead to believe and was overall an unpleasant experience. I realized through that process of selling my own business how broken it was, and from there I started by helping a friend sell his own company.
I officially started Quiet Light in 2007 to help owners of profitable websites, Internet and software companies successfully sell their businesses.
How many transactions have you participated in?
Collectively, Quiet Light has helped sell over 500 businesses; last year we did over 50 transactions totaling about $12m in value. We specialize in niche deals, which could be low six figures to $5 million in sales price.
Where are you based and what is the geographic focus or scope of your services?
We are headquartered in Inver Grove Heights and have broker agents in different regions of the US, although we work in Canada and the UK as well. We’ve also had occasional deals in other countries, but we limit our dealing in other countries. Within the US there is not much in terms of a geographical restriction.
What are some questions that an entrepreneur should ask a broker before engaging?
How long have you been in business?
How many deals do you do in an average year, and what are the average sales prices?
Roughly what % of deals do you take on that close?
Can I speak to references?
Have you ever been involved in litigation in relation to one of your deals? What was the nature of the litigation and what was the resolution?
Do you require an exclusive contract, and if so, how long is your exclusivity?
Do you require a retainer, and if so, how much?
Who handles escrow for your deals?
If the broker handles escrow, how do you protect escrow funds?
What do fees typically look like and what should a seller expect from a good broker?
Great question. Fees are typically 10% with some form of a minimum commission. There can be some variations on that depending on the deal, but that is the typical structure. As to what a good broker will do:
A good Internet business broker will ask you a lot of questions. You should expect them to be very honest with you about the good aspects of your business as well as the drawbacks. Every business will encounter some objections, and a good broker will know how to identify these and explain them to you.
A good broker should explain what you should expect in the due diligence process so you can prepare
A good broker will expect from you your financials and key data of your business. Do not rely on a broker to create this for you: you are the one specifically liable should something go wrong with the sale of your business. Know what is being represented to buyers.
A good broker will explain the process every step of the way.
A good broker will occasionally call you with updates rather than forcing you to call them all the time
A good broker will not scoff when you want to seek outside counsel
What are some pitfalls to avoid when preparing a company for sale or negotiating a sale?
Avoid being under-prepared. Selling a business requires that you have your financials organized and other key data organized. Have copies of plans, incorporation papers, any past legal issues, etc. ready to be sent over to a buyer.
Clearly define your selling process. At Quiet Light we allow buyers to do as much general discovery as they want, but they do not get access to verification materials until the framework of a deal is in place. Once that framework is in place we set a time limit for verifying the business (due diligence). This protects the seller from a buyer who drags a deal out for an unreasonable amount of time and uses that for leverage against the seller.
Keep your goals in mind. A lot of sellers get wrapped up negotiating items that, frankly, aren’t that important. They get wrapped up in trying to “win” a negotiating point rather than seeing the bigger picture. Keep the big picture in mind, keep your key goals in mind, and concern yourself only with the items that impact those.
Always have an attorney review the final contracts. Most of the contract work early on in a deal can be done between the buyer and seller. The final binding documents should be reviewed by your attorney.
Don’t wait until you need to sell your business. Keep that great built in leverage of having the option to hold on to your business.
Think outside of just strategic sales. A strategic acquisition is one where your business is acquired by another company that wants to bolt on your services within their existing business model. Think of two competitors merging, or think of Yahoo buying Tumblr. Strategic acquisitions are relatively rare compared to more traditional market acquisitions where a new owner comes and takes over your business as it is. Having both options will give you leverage.
Don’t wrap up too much value in yourself. A business should be transferable to someone else. If you are doing things that only you can do well, you will have problems finding a buyer.
Anything else you would like to add?
Proper planning starts early. If you think you want to sell within the next 2-3 years, start talking to someone now. We turn a lot of people away with assignments to work on their businesses for 12-18 months. Even if you are not sure if you want to sell in 2-3 years, give yourself the flexibility of having that option potentially open.
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