The quote is from Mordecai Evans who is the Lead Advisor for Business Acquisition Advisors, LLC located in Augusta, Georgia. Mordecai went to work for a pharmaceutical company after graduating from Clemson. His passion for entrepreneurship and sales led him to becoming a broker with a business brokerage firm. Recently, Mordecai formed his own merger and acquisition firm, Business Acquisition Advisors.
Rick asked Mordecai to do a Zoom interview about his experiences with the small to medium size business market. What follows is a summary of that conversation.
Rick began by asking about what the broker’s response should be to a business owner asking about what is necessary to sell a business. Mordecai answered that after looking at the financial statements and the marketplace, he takes the buyer’s perspective and conducts a “pre-due-diligence investigation.” Also, he conducts a conversation with the seller about price expectations. For the highest price possible there may be some things that need to be changed, which might take one to two years. There is always the option to take the business to market without a price to better understand what the market price might be.
Rick observed that the diligence investigation Mordecai conducts is similar to what he recommends for the business owner with the strategy of Prior Diligence explained at his substack (rickriebesell.substack.com). Often, the reason owners fail with the strategy is that they fail to prioritize important tasks of planning and taking action while paying attention only to urgent tasks.
Mordecai mentioned that he had a friend who said: “The only reason to start a business is to sell a business.” The point being that a business owner should run the business like a business not a job. “Nobody wants to buy a job.” Business owners are often well advised to counsel with a business broker, understand the market for their business, and make the changes over time to obtain the highest price for their business.
Rick responded that where the owners of a business have received advice from a broker that to get the highest price there were some things to work on, that work might take as much as three years. The issue arises of an owner who might not make it to the end of three years for health or other reasons. In this case, the owners should have an owner agreement among them to provide a value, among other things, to a withdrawing owner. Mordecai provided some examples of where business sales were adversely affected by the absence of an owner agreement.
Mordecai cited a recent video he had done on identifying a business broker early in the sales process to obtain advice about what buyers are looking for.
Rick asked about the relationships of the professionals, such as lawyers, accountants, and appraisers, with business brokers. Mordecai pointed out that business brokers, like consultants, can talk directly to all the parties unlike the professionals who have client relationships involving advocacy and confidentiality constraints.
Rick and Mordecai discussed the difference between selling to an insider, such as an employee or other owner, and selling to a outside buyer without prior experience in the business. An insider will not pay as high a price as an outside buyer, because the insider already possesses the “good will” knowledge that an outside buyer will pay for. Notwithstanding an appraised value for a minority interest, that type of valuation is not available in the marketplace because there is no market demand for a minority business interest.
For those looking for a business broker relationship, Mordecai’s contact information is as follows:
Mordecai L. Evans, Lead Advisors
Business Acquisition Advisors, LLC
mevans@baallc.biz
Office: 706-828-1483
Mobile: 706-631-2466
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