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The M&A Revolution
First and foremost, If you’re looking to hire an M&A advisor, you should keep in mind that M&A groups survive by charging retainers, not by selling companies.
These advisors survive by charging up-front valuation (often $50,000 JUST to list you), marketing fees, and an ongoing retainer fee. The retainer fee alone is often $5,000-$10,000 per month.
After six to 18 months of shopping your business with no success, you’ve sacrificed quite a bit of time and money. It’s irrelevant that the retainer is to be taken against any commission for selling your company when it’s so unlikely that the firm will successfully sell your business at all.
Incentives are misaligned.
While there could be numerous reasons your business doesn’t sell unrelated to the M&A advisor, there’s something inherently wrong with the retainer model. First of all, the fees themselves scare off some potential sellers from even testing the market with a professional. It also misaligns the incentives of advisors. Even if an advisor thinks you have no chance of selling your business, he could take you on as a client to enjoy the fees.
This is just one side of M&A firms/brokers, the other side are the 'flippers'. They will tell you that they can quickly sell your business and they have buyers ready and waiting.
Of course, these brokers may have buyers lined up for you, they can likely flip your company for 50/60 cents on the dollar if they sell your company as it stands. Why? Because you're probably not ready to sell (more on that below). A business built for lifestyle isn’t a business built for sale.
This type of fire-sale doesn’t take long, they earn a quick buck, but you lose out.
If you choose to go this route, choosing and hiring M&A advisors to handle the sale of your business is probably the most important "purchase decision" you will ever make as a business owner.
On the plus side, working alongside an M&A advisory firm not only gives you professional knowledge to accelerate your sale but provides comprehensive insight that only comes with a wealth of experience.
M&A 2.0 - OUR ALTERNATIVE
If you are even contemplating selling or exiting your business in the next 6-24 months, and you want to receive its actual worth, then you have to focus on Value Creation and PREPARE for the sale.
That’s where we come in. Our strength is helping owners like you increase the value of their business by around 30-50%, be ready for a successful sale, and find the right buyer.
That's right, we don't want to just sell you as quickly as possible and bank the commission. Not only is this so our clients get what their life's work is truly worth and not get ripped off, but quite honestly, the better your sale price, the better the deal for us.
Most lower middle market companies come to us with Multiples of 3.4-3.6. This is determined by utilizing our Exit Valuation Survey. From this, you can receive our Risk Report and a breakdown of your score in the 7 PIllars of Value Creation from our Analyst team - free of charge.
You will see what the components of your Multiple looks like now as compared to what it needs to look like to add 1.5-2.0X onto your Multiple, thus increasing the value of your business.
If you wish to engage us to create your full 7 Pillars of Value Creation Report it will act as the gameplan to what you need to do. This customized report is $2,500 and it may be the most important investment you ever make.
Some clients prefer we work directly with them to implement the changes needed to their components to increase the Multiple. We call this The Cinderella Project. The Value of your business will increase as time goes by and each stage is administered and takes around 12 months to complete the changes. You can usually comfortably expect a 1.5-2.0X increase in your Multiple.
In addition, we normally see a 10-12% increase in your EBITDA (adjusted earnings) after focusing on your Recurring Revenue and Margin Engagement.
You may have noticed that we have talked a lot about Value Creation here. That is something you do not get from a standard M&A firm. With no regard to building the value of your business, they will just help you sell your business, as quickly as possible to get their fee - usually 6%. And that's along with a $10,000-$15,000 cost for a Broker and $35,000-$40,000 cost from an M&A firm to create your CIMs Report
M&A FIRM vs. EXIT
Comparison Table
(Hypothetical Example)
Our commission can be as low as half that of an M&A firm at just 3%* and our success fee is based SOLELY on the Value we create for you. So what do these numbers mean for you? Look at the table below.
We've compared the sale of an $8,000,000 Gross Revenue business handled with a Broker/M&A firm, as opposed to Exit The Family Business' Cinderella Project.
*Commission can be subject to company size/preparedness
SALES PROCESS
BROKER/M&A FIRM
ETFB CINDERELLA PROJECT
GROSS REVENUE
$8,000,000
$8,000,000
EBITDA
$1,000,000
$1,200,000
MULTIPLE
3.4 X
5.0 X
SALES PRICE
$3,400,000
$6,000,000
VALUE INCREASE
0
$2,600,000
VALUE BUILDING FEE
NA
$520,000 (20%)
COMMISSION
7% on $3.4M or $238,000
3% on $6M or $180,000
INITIAL FEE
$10,000 - $40,000
$0
MONTHLY RETAINER (NET)
?
$0
NET PROCEEDS
$3,152,000
$5,300,000
Working with the Exit Team and implementing our 7 Pillars of Value Creation process created an increase of $2,148,000 in the sale price. That's over $2 MILLION that the business owner would have left on the table, benefiting the buyer. You do not want to be "that" guy.
M&A Firm vs. The Cinderella Plan
Comparison Table
Our commission is half that of an M&A firm at just 3% and our success fee is based SOLELY on the Value we create for you. So what do these numbers mean for you? Look at the table below.
We've compared the sale of an $8,000,000 Gross Revenue business handled with a Broker/M&A firm, as opposed to Exit The Family Business' Cinderella Project.
Working with the Exit Team and implementing The Cinderella Project gives an increase of $2,792,000 on your sale price. That's nearly $3 MILLION that the business owner would have missed out on, but someone else would pocket. Make sure that isn't you.
T. F. - Danvers, MA
When I first met with Rick, Steve and the Exit Team, my 35-year-old machine shop was worth a mid $3Million number. 12 months later, I have offers for $5.5-6Million. These guys were a godsend to my family!
Tony Y. - BOSTON, MA
This process works! When Rick began working with my company, we were entertaining mid/high single million-dollar offers from competitors who did not have the cash up-front. After following the 7 Pillar System, and bringing in the Exit Team & legal colleagues, we successfully sold the company within 9 months for a “mid-teen million dollar” cash figure, where EBITDA was increased and the multiple was 1-1.5 point higher.
How It Works
It's time to face the truth. If you don't plan your exit correctly, you could end up working until you die. Your journey to a successful sale and increasing the value of your business by 30-50% starts with taking our Exit Valuation Survey. This tells us exactly where you are now, the exact performance of your business, and what you need to do to improve. You can access your buyer Risk Report and speak to our analyst team on a complimentary call to discuss your results, increasing value and exit options.
TAKE THE SURVEY
Discover how your business scores in
the 7 key drivers of valuation
ACCESS RESULTS & ANALYST
Understand the risks a buyer sees
when valuing your specific business
INCREASE BUSINESS VALUE
Implement the "7 Pillars Of Value Creation" & increase your business value
© 2024 ETFB. All Rights Reserved
*The Lower Middle Market is comprised of businesses worth $5-$30 million, typically having EBITDA of $1 million - $4 million.
The 7 Pillars of Value Creation is our name for our work as Business brokerage services and related consulting pertaining to business sales, mergers, acquisitions and business valuation. Exit The Family Business the downloadable guide and any accompanying assets or affiliates are provided for informational and educational purposes only. It is not intended to provide tax, accounting or legal advice, nor is it an offer or solicitation to buy or sell, an endorsement or sponsorship of any company, security or fund. Certain owners, officers or affiliates may be associated with investment firms and may make referrals from time to time for such services, but this does not constitute investment advice, nor should it be construed as Exit The Family Business being in that business. We always suggest you seek professional advice. Past results are not a guarantee of future results.