The Business Sale Process with Matteo Valles

October 25, 2021

Recently, I began a series that explores the practical application of various legal needs or issues you may encounter in your business. Today, I’m continuing that dive as we explore the business sale process with Matteo Valles. As a business broker, Matteo has seen just about anything you could ever expect to see during the sale of a business. Join us as we dig into what transitioning, selling, and buying really look like.

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TIME INDEX:

00:42 – The Business Process: Transitioning, Selling, and Buying, with Matteo Valles
02:04 – A Typical Transaction
03:39 – Intangible Assets
04:59 – Valuation
06:51 – What to Focus on as a Seller
08:30 – Looking to Buy
10:19 – Are You Really Prepared
11:51 – Expectations vs. Reality
13:08 – Banks vs. SBA vs. VCs
14:41 – Recommended Reading
15:56 – One Piece of Advice
18:09 – Strategic Buyers
18:51 – When Should a Business Owner Approach a Broker
19:36 – Wrap Up

Getting to Know Matteo Valles

Matteo Valles is a business broker and Vice President of Business Transitions with Sunbelt Business Brokers of East Tennessee. In his role with Sunbelt, he advises business owners through the process of selling their business, focusing primarily on those generating $500k to $5MM in revenue. He’s gained a powerful understanding of all aspects of a business transition through his work at Deloitte Consulting where he helped Fortune 500 companies analyze and implement large-scale changes. Similarly, Matteo’s experience at Delta Technical Operations and his Mechanical Engineering degree from Georgia Tech make him uniquely qualified to advise manufacturing, scientific, and industrial companies.

If you would like to contact Matteo, you can reach him via email at MValles@sunbeltnetwork.com or at his personal website, MatteoValles.com. Because this is only a summary of our interview, I encourage you to listen to the podcast for a full and detailed conversation with Matteo.

What Does a Business Broker Do?

Business brokers advise business owners through the entire process of the sale. Matteo primarily works with sellers and compares it to a sellers’ agent in real estate. However, there’s a pretty large difference between a business broker and a real estate agent. For example, oftentimes, each party will have its own agent in a real estate deal. A business sale, on the other hand, often has one agent that ends up sitting somewhere in the middle. Matteo primarily serves the sellers’ interests but there are times when he needs to assist the buyer as well. Oftentimes, a first-time buyer won’t know where to go for financing. Likewise, they may not have an attorney or a CPA. Therefore, the broker will often act as a buffer between the two parties.

The Business Sale Process Through the Eyes of a Broker

similar to that of a first-time home seller, the business sale process involves the broker providing some education on the process. Unlike selling a home, however, the business sale process usually takes around 6 to 12 months. During that time, a broker will help determine the value of the business by looking at the financials. Likewise, they will try to get a clear understanding of your business’s intangibles. This is because things like goodwill could increase the value beyond what is shown through the company’s financials.

Additionally, the broker will put together the marketing materials for the business’s sale. In real estate, this consists of a couple of paragraphs and some photos. However, marketing through the business sale process is far more involved. The broker will conduct hours of interviews with the owner, learning all there is to know about the business, its foundation, clientele, and where it’s projected to go. All of this information is compiled into a document that usually ends up being 80-90 pages long. Once a suitable buyer has been found, the broker helps to negotiate between the buyer and seller and arranges the attornies and CPAs, and financing.

The Importance of Intangible Assets

Matteo shared some stories of business owners telling him they work 60-80 hours per week, even sleeping under their desks at times. Although many business owners wear this as a badge of pride, the truth is this isn’t going to impress many buyers. They’re not interested in purchasing a business that requires them to work 80 hours per week.

On the other hand, Matteo is currently working with a business owner who works 3 days per week. More than that, he explained that every time he goes into the business to meet with this owner, he’s working on personal matters. That means there is very little time commitment required of this owner. What this tells prospective buyers is that there is very little risk associated with this company because they won’t have a specific role to fill. It also provides potential buyers with a better lifestyle. Ultimately, a business like this will have a much larger pool of buyers. Why is this a good thing?

Having more buyers interested in your business means greater demand. Since there’s a limited supply (your business) under great demand, the value goes up. Similarly, this can help increase your value multiplier. In the instance of the owner who works only 3 days per week, he has successfully reduced the company-specific risk by removing himself from the day-to-day operations. Essentially, he’s selling the golden goose. Buyers want a business that offers them a great income with very little risk and little to no time requirement.

What Sellers Should Focus On

Ideally, you began preparing to sell your business when you opened it. However, that’s not often the case in the real world. So, what should you focus on if you’re planning to sell your business anytime in the next 10 years? The first thing a buyer is going to look at is your financials. Therefore, if you’re able to decrease costs in any way, that should be your first step.

Perhaps the greatest thing you can do to prepare your business for a sale is to simply remove yourself from it. Matteo was adamant that this is the biggest factor in reducing the risk for a buyer and significantly opens up the buyer pool. I appreciate the fact that this can be difficult for business owners. The natural inclination is to jump in and take care of whatever problems arise in your business. I mean, it is your business after all. But developing your team and empowering them to identify problems and create solutions for them doesn’t just make your life a little simpler, as the business owner. It actually adds value to your company, making it more attractive to buyers and investors.

When Should a Business Owner Approach a Broker?

The short answer to this question is it’s never too early. Matteo expressed that he’s had business owners who just started their companies reach out to him for information on how to prepare their businesses. I am a firm believer that you should always begin your business with the end in mind. You see, your business is one of your greatest assets. If you’re tracking your 401(k) and IRAs for your retirement, you should absolutely be tracking the progress and growth of your business. It will factor into your retirement planning.

If you’re closer to retirement age, speaking with a broker becomes more and more important with each passing day. You don’t want to wait until the last minute to reach out to a broker because the business sale process is a lengthy one. So, if you’re looking at selling your business within the next 3 years, contact a broker as soon as possible.

Wrapping Up…

Folks, I hope this provides you with a little more insight into the business sale process and what it might look like to work with a business broker. Once again, I encourage you to listen to the podcast, as this blog is only a review of the material covered in my interview with Matteo. You could find the answer to a specific question that you might have.

Are you interested in selling your business? Do you know exactly what to do to mitigate company-specific risk and drive your value multiplier through the roof? Reach out to us! The Financially Simple team has helped hundreds of business owners better position themselves to make the ultimate sale.