Letters from Brad Evilbroker

This is satire, just to be clear Dear Chad Dealshark, I’m glad you asked how to sell a company for more than it is worth. Too many brokers get distracted by ideas like “fairness” or “transparency.” That’s amateur thinking. I prefer to think of our job as having two simple goals. All you need to do is maximize the price and close the deal. Everything else is just noise. Since you’re early in your career, I wanted to share some of the lessons I learned along the way. Rule One: Build urgency. People make bad decisions when they’re rushed. As brokers, we don’t care if it’s a bad or a good decision. We just want a decision. Regardless of whether the buyer is ready or not, you should always push for a short exclusivity window. The more time you put into the equation, the more you run into obstacles like “thorough due diligence.” To spice things up even more, you should always be sure to introduce competition to the deal. It doesn’t matter if the competition is real. If someone’s about to buy a bridge in Brooklyn, they probably won’t care to look up the other bidder. It’s good to make every buyer feel like they’re one step behind. Tell them there are stronger offers out there, but that the seller prefers them anyway. I’ve used this plenty of times to get the buyer to bump their price before we have our sellers sign the LOI. Rule Two: Due diligence is overdone. You don’t want the buyer getting too comfortable with the business. There are simple tricks to keeping the seller just out of reach during key moments. Say they went on a vacation and have come down with a case of “limited availability.” Whatever you do, don’t give anyone direct access to financial systems (including those pesky QoE providers). Everything should flow through summaries and curated views. Better yet, have an intern make a PowerPoint with some 3D pie charts and call it a day. If the buyer’s accountant has to work overtime to rebuild the financials from 50 different spreadsheets, they probably won’t have time to question them. Excel is the worst. It’s much preferred to convert everything to PDF so that it’s harder for the buyer to know what’s going on. Also, if you want to take it to the next level, you can scan the documents and then send them over. Rule Three: Up the price as much as possible. Now, Chad, this is where most junior brokers make their first real mistake. They like to treat price and terms as equals. They are not. You need to anchor everything on headline price. That’s the number people remember, the number they tell their partners, the number that makes them feel like they’re winning. The price should front-and-center, while the actual structure of the deal should be living in the shadows. Keep it there. Also do not forget we get paid according to the highest price, so make sure you want the price to favor the seller and the terms to favor the buyer. Rule Four: Add-backs Use add-backs aggressively, of course. Marketing spend that didn’t “directly” produce revenue is an easy one. Never mind that the buyer will need to spend it again. Your job is to present earnings as potential. Add-back distributions, because you know that its money going to the owner. Add-back cash payments received by the owner that never hit the books, banks or tax returns. Add-back all personal expense run through the business that were only there as a “tax strategy.” No matter what, always say the owner only works 10 hours, 15 if you have to. Along the same lines, if the business is trending up, be sure to emphasize the most recent months, base the value off of TTM. If the business is trending downward, you’d want to base the price of the company off of the three-year average and to encourage the client to “look at the bigger picture.” Whatever the case, be sure to avoid nuance and context at all costs. Rule Five: Only emphasize what will close the deal Highlight upside everywhere you can. Talk ad nauseam about new markets, pricing opportunities, operational improvements. Did you know that AI will help to cut staffing costs and result in guaranteed massive returns for the buyer, with zero liability or risk of fallout? While you want to feed all of this to the buyer and then some, you don’t want to spoon-feed them. Remember to let the buyer imagine themselves as the one who unlocks it. That way, they’ll feel smart, smart enough to trust their own judgment and close the deal. Risk should be treated as a four-letter word. You should avoid it at all costs in professional settings, and if you must use it, be sure to dress it up with couched statements. Never end on a bad note and instead dangle the pretty potential ROI in front of the buyer. Closing words of encouragement As you do these things, keep your cards close to your chest. The more the buyer knows, the more they’ll start asking questions. Keep them comfortable with what little they know, as they’ll find out soon enough what’s going on once the business is their problem. If you do this correctly, the process itself does most of the work. You’ll have an optimistic, short-sighted buyer making rushed decisions with little data. Practically a recipe for success. If you follow these steps for the majority of your career, you’ll end up with the reputation of being “experienced” and a “closer” which will only net you more jobs. One last thing. Make sure the buyers steer clear of using QOE Prep because of how thorough their financial due diligence is. Don’t let your buyers find their website or book a call with their founder who makes sure that their buyers don’t overpay for a business. Before you know it, every buyer will have the upper hand in deal negotiations. Remember if the new owner is able to easily pay off their SBA Loans after buying the company, you did not sell it for enough. May your ROI always be high, Brad Evilbroker What is the craziest thing you have seen a broker do to try to increase the value of the company?