SELLING THE BROOKLYN BRIDGE

Beacon Equity Advisors

Greetings!

There is an old expression about being stupid enough to buy the Brooklyn Bridge. I think this goes more to a person's gullibility rather than the perpetration of fraud. This expression recently came to mind when I was on a seminar panel for business owners and advisors along with David Humphrey (principal at Beacon Equity Advisors). The discussion topic centered on selling private businesses. A lawyer was commenting on the importance of having documents in place if you wish to sell a business. He was referring to leases, contracts, etc. His excellent point was you can't sell a business if you can't transfer it. This is similar to real estate. If you can't transfer the title free and clear, you are out of the game. That's when trying to sell the Brooklyn Bridge came to mind.

I realized that many business owners wishing to sell their business are unknowingly trying to sell the Brooklyn Bridge. It happens all the time. Why? They try to sell what they don't really own. I am not talking about hard assets such as a vehicle or inventory; that's easy. I am referring more to those pesky little (but very important) intangibles that can make or break a business.

Here are two examples:

One example is the retail business whose location is not only important, it is everything. If the lease is not readily transferable to the new owner, the retail business has virtually no transferable value.

Another example is the distributor who is the exclusive representative of a product in New England...with only history and a handshake backing up this agreement. The business value is in the "exclusive" relationship with a key supplier. However, the seller does not control the arrangement, the supplier does....unless there is a contract. When a buyer purchases a business, he or she expects all of the pieces and parts which comprise the entity, and without problems. Maybe the buyer will be gullible, but don't count on it. In the unlikely event a buyer is, don't expect the lawyer and accountant to be fools too.

In both of these examples, the seller was counting on selling what he or she could not produce. The moral of the story is very simple: If you wish to receive top dollar for your business be sure you can freely transfer all its important elements. The odds of finding a sucker stupid enough to buy the Brooklyn Bridge are pretty slim.

Regards,

Jon SIgnature

Jon Fudeman

Beacon Equity Advisors

Coming up in future newsletters:

How to prepare a business for sale.
What buyers are looking for?
Using a contingent sales price.
What is cash flow?

	Since 1985 Beacon has worked on behalf of hundreds of business owners. Our representation has enabled these owners to realize the true value of their company in this once in a lifetime transaction. We bring together owners and buyers in a way that defines and enhances value, facilitates smooth transitions and enables company traditions to be carried on.