Local Firm Offers Range of Services
Sunbelt Business Brokers, a Peoria Heights company, offers a long list of services to the professional community, according to owner Steve Sink. "We provide specialists in mergers and acquisitions, equity investors, industry-specific experts, and strategic positioning," he said.
Sink said his firm is affiliated with the national Sunbelt Business Brokers, an affiliation which gives the company access to the services of the largest business broker network in the world. "We also belong to the International Business Brokers Association, which sets the educational and professional standards for the industry. Collectively, this group represents more than two-thirds of the business brokers in the country. We focus on serving the needs of buyers and sellers of businesses in central Illinois."
Sink, who is also a speaker and teacher at ICC, as well as serving on the boards of local organizations, said he got into this business because he had the necessary expertise. "I felt with my background in corporate management, where I had run major divisions, and having owned companies, I had the experience needed for this profession. Buying and selling businesses for corporations and for yourself provides an insight into the mindset and requirements to successfully sell a business."
Business brokers have been matching sellers and buyers for many years, Sink said. "Typically, brokers are contacted by the owner to sell their business on a contingency basis for a percentage of the sale price. Brokers are experienced in dealing in this confidential environment and know the steps to take to protect the business owner."
Because a business must be sold confidentially and professionally, business brokering by necessity is a low profile profession, which may explain why the public doesn’t hear a lot about the profession. "A business broker can provide many services owners can’t do themselves," Sink said. "A major concern of the owner is ensuring confidentially will be maintained and knowing a buyer has the financial capability for the transaction. Prior to any details being revealed, all prospective buyers are required to sign nondisclosure documents, as well as providing a personal financial statement."
An important benefit business brokers provide to sellers is assistance in determining a fair selling price. "Many owners do not know the value of their business. We can provide valuation services that range from a letter of opinion, a formal business valuation, a merger and acquisition analysis, and valuations for estate tax, ESOP’s, divorce, and situations requiring litigation," Sink explained. "Sellers save time because they can continue to focus on managing their business and not be distracted. Once an offer is made, the broker can assist with developing the business plan and locating suitable financing. Finally, the broker assists in the negotiations and keeping the process going in the right direction. A fundamental requirement is for transaction to not disrupt the current employer/employee relationship, as well as the current customer base or the value."
Sink said the company uses area newspapers, business journals such as InterBusiness Issues, and the Internet to advertise. "We also attend key industry shows to find potential buyers. For instance, Sunbelt will have a booth at the National Restaurant Show in Chicago. However, most of our sellers and buyers come to us by word of mouth."
Because so many details go into the buying and selling of businesses, Sink said the most challenging aspect of his business is finalizing the deal. "The amount and type of supporting document detail varies with every lender. This can be exasperating for both buyer and seller."
The most rewarding aspect of the business, however, is when the sale is completed and both parties have achieved their goal. "We recently sold a business with excellent cash flow and few assets. Because of the business’s low asset value and the buyer’s minimum financial capabilities, the banks didn’t want to finance the sale. We found a source that provided 85 percent financing plus operating capital. Both parties achieved their goals: the seller retirement and the buyers, a young couple, the chance of a lifetime," he said.
Sink said his firm is different from similar firms in the area. "Our brokers are required to get their Certified Business Intermediary (CBI) certification. This makes us the only business brokerage firm in the area that has certified brokers. In addition, our affiliations with Sunbelt and IBBA provide our sellers tremendous exposure to buyers from all over the country. We work with the seller’s attorney and CPA to insure a coordinated sale effort."
Business financing comes from one or more categories, Sink said: individuals using personal, seller financing, the SBA, banks, and non-traditional lending companies participating in the SBA program. "These companies are much more aggressive and can make up to 90 percent loans—but at a higher interest rate."
Potential buyers face many decisions, which Sink said Sunbelt can help them sort through. "We suggest buyers look for a business they can be passionate about. Most business buyers end up with a business that’s a far cry from what first captured their imagination. Successful owners are those who want to be in control; profit is their way to keep score."
For sellers, Sink said determining the value of a business can be a very emotional experience. "You’ve devoted your time, money and energy to building, running and operating your business; it may well represent your life’s work."
Beyond emotional issues, sellers are often anxious to make a good profit, and Sink said there is a tendency to overprice. "Their future lifestyle is riding on the sale of their business," he explained. "Conversely, this is also true for the buyer. No answer based purely on numbers is going to be exactly right. The key factor is there must be enough profit left over for the buyer to pay themselves, pay for financing, and provide money to reinvest in the business and make a profit."
According to Sink, the national average to sell a small business is 286 days, while larger businesses—those with revenues of $1.5 million or more—take longer.
When a buyer is sufficiently interested in the business, business brokers help prepare an offer or proposal, which may have one or more contingencies. "Usually, contingencies call for a detailed review of financial information and records. The buyer’s proposal will be presented to the seller for consideration. A buyer may accept the terms of the offer or make a counter-proposal. If the buyer’s proposal isn’t accepted, the buyer could withdraw at any time. Business brokers will submit all offers to sellers for their consideration, and all offers should be looked at with thought and care. When the seller and buyer are in agreement, the buyer may bring in outside advisors to help review the information. When all the conditions have been met, final papers are drawn and signed. Once the closing has been completed, money will be distributed, and the new owner will take possession of the business," Sink said.
He said buyers usually fill into categories based on their motivation and/or finances. "An individual buyer is typically an someone with substantial financial resources seeking a business—usually less than $1 million—which is financially healthy, with a sound return on the investment of both money and time. A strategic or synergistic buyer is almost always a company, with a goal to enter achieving economies or eliminating some element of competition. Strategic buyers look chiefly at businesses with sales of more than $20 million and effective management in place and willing to remain. An industry buyer, sometimes known as the buyer of last resort, is often a competitor of a similar operation. This buyer already knows the business and will pay for assets but not goodwill. A financial buyer is influenced by returns, coupled with significant financing of the purchase.
"Each type of buyer has distinctive characteristics that correlate to the motivation behind the purchase of a particular company. In addition, the price each is willing to pay for a company is directly proportional to the motive."
Some buyers are interested in purchasing franchises, which Sink said can be good investments. "They typically have a very low failure rate and are easy to finance. There are large numbers of franchise concepts available and because we represent more than 250, we believe we’re in a good position to direct buyers to one that matches their needs."
Sink said Sunbelt offers franchise opportunities for companies such as ACE Hardware, Express Personnel, Molly Maid, Fastsigns, AAMCO, Payless Car Rental, Martinizing, Verlo, among others.
Sink said he foresees some new elements—along with some things that will never change—in the future of business brokers. "The profession will continue to retain its low profile; after all, you can’t put a For Sale sign in front of your business. Given the mobility that technology allows people and businesses, the need for a nationally recognized resource to match buyers and sellers will become more self-evident. We’ll also see a switch from the traditional hard asset lending to financing based on soft or intellectual assets."
For his own business, Sink said the future includes opening an office in Bloomington in May, with another office planned in either Champaign or Springfield. IBI