It starts with an invitation to a “free” seminar about Selling Your Business or the Value of Your Business. Of course you think, why not. When you arrive there’s a number of young MBAs in suits and a couple of more senior people that will be presenting. The presentation is polished and professional, it sounds good, and is very convincing. As the pitch goes, they have a huge pool of buyers looking for businesses just like yours.
Then there’s the catch… In order to sell your business they need a business valuation and/or a prospectus-marketing package that costs between $5,000 to $20,000 or more. They confidentiality throw out a valuation figure, much higher than you expected, and the explanation is convincing. It all sounds great, wow, you never thought your business was worth that much!
Let’s break this down. First, the cost of a professional third party valuation is typically between $2,500 and $3,500 for most businesses. If it is a large company, a complex valuation or if it involves legal issues the cost can be substantially higher, but these are the exceptions. If you want a business valuation you should ensure the firm and individual preparing the valuation is a certified business valuation analyst. We work with several firms that specialize in business valuations and their staff are all certified analysts. Also, our firm as with most professional business brokers, offer a free Market Value Report as part of our services. If you want to know the market value of your business this will suffice. Our Business Market Value Report is based on comparable sales (comps) and cash flow based valuation methods and is very comprehensive.
Second, the marketing package. Our firm as with most professional business brokers do not charge an upfront fee or charge for the preparation of the marketing package. There are exceptions for large M&A transactions, but for most midsize businesses there is no upfront fee. Our fee is paid at closing when the business is sold.
Lastly, will they actually sell your business? Our experience from talking with business owners that have attended these seminars is no. One business owner told us he paid $20,000 and never had a buyer inquire. When he asked for his money back he got a list of buyers they claimed had inquired. Yes, he called the “prospective buyers”, none of them were what he considered real, but he never got his money back and that firm never sold his business.
These seminars have been around for decades under many different company names, but the scam is the same. The problem is these companies charge huge fees upfront regardless of whether they sell your business or not. In fact, the track record these firms have for actually selling businesses is very poor. Before you pay thousands of dollars upfront for a very risky proposition, contact us for a free Market Value Report and consultation.