|
|
|
|
|
|
| Auctioneers need help when it comes to selling their business |
|
|
|
After a delay for heavy fog, I lifted off from Birmingham on a Delta jetliner bound for Wichita and the Kansas Auctioneers Association’s winter convention.
One of my presentations was entitled, “Retire or Sell – What to Do and How.” I tried to help Kansas’ more senior auctioneers focus on a key issue that they will face as they near retirement from regular auctioneering.
Any auctioneer interested in trying to sell an auction business must start by answering a key question: What do I have to sell that another auctioneer would pay to buy?
Another way of looking at this is for the auctioneer to do his best at being objective and ask: Would I pay money to buy this business from another auctioneer and, if so, why would I?
That selling effort should begin with the auctioneer writing a comprehensive summary of the business to “tell its story.” This is a document the auctioneer would share with prospective buyers to give them a good overview and some interesting details about her auction business.
Organization is critical to any successful endeavor and this holds true for offering a business for sale. The auctioneer should be thinking what a prospect will want to see in the course of performing due diligence on the possible purchase. The auctioneer will need to make a careful inventory of everything that would convey with the business, including real estate, equipment, inventory, and other assets. Likewise, the books and other financial records should be in tip-top shape, because any prospect will carefully examine these materials. If a third-party’s approval is going to be required for a sale (i.e., landlord, bank, vendor, etc.), the auctioneer should be working in advance to arrange for this approval.
The sale of a business is an important legal and financial transaction. Consequently, the auctioneer will need both legal and financial advice. This advice should come from a lawyer and an accountant who are experienced with such sales. The value of this advice will drop in direct proportion to the delay in obtaining it, so the auctioneer should engage these professionals early in the process. It will do the auctioneer no good to obtain advice on structuring a sale if the sale has already been negotiated and made by the time the lawyer and accountant are consulted.
A lawyer will advise the auctioneer on the legal points that will arise during a potential sale of the business. In addition to the expected terms, this also includes the warranties and an indemnification agreement that the buyer will want from the auctioneer. The lawyer will prepare the contract for sale and draft all of the other needed legal documents. Protecting the auctioneer’s interests and shielding her from future claims and liability is a key objective the lawyer will work to achieve. At the end of the process, the lawyer will close the sale with the purchaser.
In order to sell anything successfully, a seller must have a good idea about value. An experienced business accountant can help an auctioneer assess her business and determine a likely market value for it. The accountant can also advise about all-important tax consequences of a sale.
When it comes to valuing a business, an auctioneer is going to be in unfamiliar territory. Auctioneers spend their careers trying to bring realistic expectations to sellers that often have the opposite. Now it’s the auctioneer who must have realistic expectations for what her business might reasonably fetch.
Auctioneers like to talk about the “buyer profile” for different assets they sell. They need to identify a buyer profile for the auction business and remember that it will be a narrow one. Auctioneering is a different kind of selling and is not for everyone. Potential prospects might include a new auctioneer, an existing auctioneer looking to expand into a new product area or geographic territory, a regular customer of the auctioneer who wants to try auctioneering, or even a competitor. The most important point for the auctioneer to know is that any prospect for the business will be most closely focused on one point – a good stream of future earnings. If the business can’t provide that, there will be little, if any, interest in it.
Here are three final tips:
First, an auctioneer who wants to sell his/her business should continue to operate it as usual. A buyer will want a vigorous, ongoing enterprise and not one that has been neglected and appears to be winding down.
Second, the auctioneer should be flexible. Most small businesses offered for sale never sell. Price might be an important term for negotiation. Likewise, a potential buyer might require seller financing.
The auctioneer will need to consider these points if they arise and respond in a manner that will try to make the sale, without sacrificing the money, certainty, protection, and finality that the auctioneer needs from a sale.
Third, when you want to sell a house, you tell everyone. When a businessperson wants to sell a business, she wants to tell only those who really need to know. This includes prospective purchasers, but not everyone else. Public news of a potential sale could spook vendors, creditors, and customers, so an auctioneer should keep quiet and notify these people in an appropriate manner and at the proper time.
“Last call …” My invitation to return to Kansas came from executive director, LaDonna Schoen-Gehring. If it involves KAA, it’s overseen by LaDonna who is beloved by Kansas auctioneers. Two other close friends who are always instrumental in my trips to the Sunflower State are KAA president, Dave Webb, and vice president, Lance Fullerton.
I send heartfelt appreciation to each of them and all of KAA’s members who extended such warm hospitality and ensured my visit was a comfortable and productive one. Thanks to everyone in KAA for everything! |
| 2/4/2010 |
|
|
