As a business broker, I answer a lot of questions about how to sell a business. One of the FAQs that I share with all business owners planning to sell their company is about the total cost to sell a business. People don’t think about all the costs involved in selling a business. The first question people always think is “How much can I get?” but the truth is It’s not how much you make, it’s how much you keep at the end of the day that matters.
So how much will you keep? What will be left depends on how much it costs to sell a business. Costs to sell a business, if you don’t consider paying off your debts, are primarily professional fees. Consider the investment in a business broker, as most business sellers are doing it for the first time, and the sale of a business is a complicated and convoluted transaction, and consider the costs of a business attorney.
You’ll also want to consider the costs of a CPA and/or bookkeeper, but chances are sellers are already using these advisors. There may be some additional costs for updating or adjusting P&L statements, but the cost of accounting shouldn’t be too significant… While some sellers use attorneys as a regular component of their business, most only need them when they start/buy a business, and when they sell…
– Neal Isaacs, VR Biz Brokers
Here are 4 pieces of important advice on picking the right advisor for legal counsil when selling a business.
1Be sure it’s a business attorney
Attorneys tend to have a specialty. Like taffy, they come in many flavors. Business attorneys, sometimes called contract law specialists, “do deals” which is what you need if you are selling a business. You don’t need a family law, real estate law, or other non-business specialist. Although some attorneys do have a complimentary dual skill set that may help if your business is transitioning within an estate, for example, focusing on finding a business attorney will be your best bet.
2Count on spending around 0.5 – 2% of your proceeds on your council
While this is just a range, it’s an investment to get good help. But you don’t have to overpay for legal counsil. You do want to invest enough to know that your attorney is “vested” in your deal and will be there for you if things go sideways. Deals do go sideways, and this can be where attorneys can make a difference if your broker hasn’t already solved the problem for you.
3Make sure you feel comfortable working with your attorney
According to a reputable survey by the IBBA and Pepperdine University, you could have a baby in about the same amount of time that it takes to sell a business, and about half of that time will include the stages that your attorney will be involved. If you’re going to work with them for this long and pay them money to represent you, it’s important that you feel that you can relate to them, that you trust that they understand you and your motivations and that you’re comfortable telling them that you really don’t understand something.
I ask attorneys to “dumb it down” for me all the time because I know that attorneys have created their own language that “common folk” like me or you aren’t supposed to understand. I think that too many people aren’t comfortable asking their attorney’s to break things down to a level that a non-attorney can fully understand easily.
4Look for “red flags”
While most attorneys are great, I’ve also met a few that weren’t. These attorneys can hold back deals from closing, instead of help get the deal done which is what you’re hiring them for. In cases where I’ve worked with these attorneys, I’ve been able to look back and notice that there were indicators right from the beginning.
Is your attorney responsive to calls/emails? Are they hyper-focused on specifics of the deal that may not matter to you? Are you finding errors in their work like a contract form that references elements from a different business (attorneys reuse contracts and language so this is not uncommon).
A good attorney will give you some time to ensure that you are comfortable with them, to assess your legal needs, and to get to know if they can help you. This is a great time to have some prepared questions to see if you are picking up on any red flags, if you feel like they are listening to you, and if they seem like the right advisor to get you to the finish line.
At VR Business Brokers of the Triangle, we are not only matchmakers of buyers and sellers of small businesses in the Triangle, but we’re also matchmakers of business buyers and sellers and the trusted professionals they need to complete transactions safely and securely, which includes great attorneys. If you need help finding a good business attorney, or you’d like to see my list of questions that you should ask an attorney, reach out to me at Neal@VRbizTriangle.com, and I’m always more than happy to help.
Neal Isaacs, MBA, CBI is a Business Broker and the owner of VR Business Brokers of the Triangle, located in Raleigh, NC. He writes about business and helps business owners discover their exit options.