Photo by Pixabay
In many ways, our engagement agreements tell our clients how our work is different from any other transaction they may have been part of in their lives. It’s not a long agreement, at just about one page, and we’ve kept it that way to keep it simple for everyone involved.
Term
Our engagements run for one year.
If there’s resistance to this, it’s often because clients are thinking about real estate engagements, which are often for 30, 60, or 90 days, and those terms make a lot of sense because housing can and often does close during those time periods. But most businesses don’t.
In fact, most businesses take between 9-12 months to sell. If there is a promising situation towards the end of the 12 months we may do a short-term extension, but most of our deals here at Apex close within one year, and that’s why we’ve kept our term as such.
Exclusivity
Our engagements are exclusive.
Once again, if clients think about buying and selling a business in terms of buying and selling real estate, they may be confused. Why not get the business out in front of as many people as possible?
One word: confidentiality. Unlike a house, advertising it for sale doesn’t change anything about its fundamental qualities. A house doesn’t wilt under the pressure of going on the market. Other houses in the neighborhood aren’t eyeing houses for possible acquisition. In a sense, a house is a fixed asset and there’s no need to keep it a secret if you want to sell it.
Businesses do not work that way:
- Employees are primarily concerned with providing for their families. If rumors of a sale start to spread, it starts to seem like a good idea to get a new job before getting fired.
- Customers don’t know what will happen to the business. They may start to move to competitors to avoid any instability.
- Competitors may smell blood and try to poach both customers and employees.
Unlike a house, that retains its inherent value no matter how much is known about it on the open market, a business can lose value, and sometimes, go out of business, just because confidentiality wasn’t observed.
We also insist on exclusivity because even if we did choose to share a listing with another advisor who also committed to confidentiality, we don’t supervise the training or day-to-day management of outside advisors, which leads to a muddled client experience and, in the worst cases, busted deals.
Payment
We only get paid when your business sells. The fact that we only get paid when the seller does shows that we are partners in this process.
That said, we have to do a lot of work in the lead-up to a sale. We’ve talked about what an average day in the life of an Apex advisor might look like (note: they are never the same).
There’s also all the stuff that we do that’s not in the agreement, like talking about the emotions that come with such a major change in life. Those can be some of the most challenging and rewarding conversations of the entire transaction.
A short list of activities not in the agreement:
- A basic valuation
- Marketing the business to the general public as well as our own internal qualified buyers
- Assistance with negotiations and due diligence
- A conduit for communications with other professional advisors
Do you have a business you are interested in selling? We’d love to chat and see if we would be a good fit for you and your goals. Reach out today.