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  • Lamar Rutherford

Consultative versus Transactional Business Brokers, Part 2

Updated: Jun 12, 2023

discussion between 3 business people

If you’re considering using a business broker or M&A advisor to help you sell your business, be sure you understand the differences between brokers . . .

Consultative brokers can help you maximize the cash you get at closing. For example, there may be ways to allocate the proceeds to lower taxes and increase the net cash you receive.

Transactional brokers only sell to outside and third-party buyers. Consultative brokers look at all the options:

· Would it be better to sell to a partner, an employee, or a family member?

· Or you might set up a management team to run your business, so you can step away to do other things while still receiving a stream of cash.

Or you could sell part of the business now to a private equity group, which will help grow your business. And then sell it at a higher price later (called a second bite at the apple). · When the private equity group sells later, you have a smaller share of the business. But at a higher price, you may end up with more cash.

These options have pros and cons. A consultative broker will help you understand the options and evaluate what's best for you. In summary, work with a transactional broker if: 1. You don't mind spending more time managing the deal 2. You're ready to sell today for whatever price you can get. Use a consultative broker if you want a partner to help you through the process and maximize your value.

How a sale might work with each type of business broker We had a client who sold home decor, a great little business doing a little over $6 million in sales. But the previous year's profits looked really low due to some extra expenses, including: launching new product lines, and expedited shipping charges because one supplier hadn't performed on schedule.

They were mostly “learning curve” expenses that the owners knew would be much lower the next year. We coached them on how their business would be valued, so they could set it up to get a higher price.

· 12 months later, our consultative brokers got 150% more than what we thought we could have gotten just a year earlier. · A transactional broker would have pushed the owners to sell right away ̶ and they would have ended up selling for less (if the company sold at all).

Two key takeaways . . . Unless you're an experienced seller, trying to do it on your own may not maximize the value you could get for your business.

You could waste a lot of time. Potentially, you could also waste hundreds of thousands, if not millions, of dollars. And that’s assuming you can find a buyer at all.

Contact us for a free strategy session Your needs will determine the right broker for you. Consultative brokers help you prepare and choose the right option to drive up your value and meet your personal goals. They're knowledgeable about financials, valuation, terms, and finding the right buyer.

Whatever your biggest challenges, we’ve seen them before and know how to overcome them.

Why not get started with a free strategy session? You’ll get a step-by-step plan to start preparing you and your business to maximize your value.

We'll help you plan how to improve your business, so you'll be a much better prepared seller and get a far higher value.

To get your free strategy session, contact us.

This is for business owners who are ready to sell now or in the near future, even if it's to family members, a partner, or employees. If you decide to come to the session, have an open mind and be ready to learn. And be realistic. We'll give you honest feedback about whether your business is ready to sell or not. We're not going to build up false hopes, but we'll advise you on how to improve the odds of getting the value you want.


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United States

+1 619-333-6296
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