Before becoming a business broker, Peggy Kragh’s career included stops in e-commerce, online publishing, construction, property management, and telecommunications. Peggy’s marketing savvy and a finance background led to success at every step of her journey. But it wasn’t until she joined the Murphy Business network that Peggy found her true calling as a professional business broker.
“It’s not an easy business,” she explains. “But it’s very rewarding to see a seller get full value for their business and to see that business flourish after a sale.”
Since launching her brokerage business in 2008, Peggy has become one of Murphy’s most successful business brokers. She is a three-time member of Murphy’s “Million Dollar Club” and was named the #1 Murphy Business office in 2015. These days, Peggy handles business sales in three of Montana’s most attractive metro areas, boasting a sell-through rate of more than 80%.
In a recent conversation, we asked Peggy for her advice to business owners getting ready to sell their business. Here’s what she had to say.
Why Hire a Business Broker When Selling?
Every year, thousands of business owners sell their companies. Yet the vast majority of these sellers don’t actually bother to hire a business broker. According to Peggy, many of these sellers struggle to sell their business for proper value.
“We hear over and over how business owners have tried to sell on their own and have run into problems,” she says. “Most business owners have never done this before, and a business broker brings a lot of value to the process.”
In Peggy’s experience, business owners make a number of common errors when they try to sell a business on their own. Some end up selling their business for a fraction of its actual value, while others struggle to attract qualified buyers.
“One of the biggest mistakes that business owners make is selling to the first buyer. Someone approaches them to sell their business and they make that sale without putting their business on the market. I always say that one buyer does not make the best price.”
“Other business owners will put too high a price on their business, and then it doesn’t sell. If it sits on the market, people start to think there’s something going on with it, and then you need to drop the price dramatically.”
Peggy says that business sellers can easily avoid these issues by hiring a qualified and experienced business broker. This way, you can start with an accurate sense of your business’s value. What’s more, you’ll have an expert to help you maximize that value.
The Value of a Professional Business Valuation
When a business owner comes to Peggy with the intention of selling their business, Peggy starts by conducting a professional business valuation. This, she says, is an integral step for business sellers, one which underscores the value of hiring a business broker.
“Most property owners know the value of their property. But business owners rarely know the value of their business. We show them on paper what that value is and where that value comes from. Once somebody has gone through that process, they understand our value, because they understand that we know the market.”
During the valuation process, Peggy works closely with business owners to help them understand how their business value has been calculated. Sellers learn how different aspects of their business influence this figure, as well as what steps they can take to boost the value of their business.
“What I’m doing is helping someone understand the value of their business, and what’s a big contributor to that value, and what’s a big deterrent to that value,” Peggy says, stressing the importance of the valuating your business with a business broker. “You have to have a baseline, and you have to understand what creates value in a business.”
Boost Value with Help from a Business Broker
Once her clients have gone through the valuation process, Peggy employs a number of strategies to help them capture full and fair value for their business. If a seller is happy with the valuation figure of their business, Peggy helps them market their business. As a member of the Murphy Business network, Peggy has access to national and international brokerage associations, allowing her to reach a wider pool of qualified buyers.
Before listing a business, Peggy prepares bespoke marketing materials for the business. This helps her attract a larger pool of qualified buyers, and it helps her clients capture full value for their business. “It takes packaging,” Peggy says of the marketing process. “You already know the value of your business. But we package the business so that the buyer sees the value.”
If the valuation figure is lower than the seller expected, Peggy will work with them to boost the market value of their business. To do so, she identifies issues that reduce the business’s value on the open market, as well as strategies for how to increase the business value.
According to Peggy, there are three common reasons for a lower-than-expected business valuation:
Dependency on the Owner. “A business owner who’s required for everything — that’s not attractive for buyers. What happens to the business when the previous owner isn’t there?”
Concentration of Customers. “We see a lot of businesses where 70% or more of their business comes from just one or two customers. That’s a big risk for a new owner.”
Living Out of Your Business. “You need to keep your personal life separate from your business life. I always tell clients: Clean records sell.”
Peggy says that a number of her clients who were initially disappointed with their original valuation later managed to sell their businesses at a much higher figure. She cites one case in particular where a seller received a much lower-than-expected valuation. With Peggy’s advice, the owner successfully doubled the value of his business.
At the end of the day, Peggy believes that hiring a business broker is an important step for any business seller. “Selling a business is an emotional process, and most business owners have never done this before. They need someone to guide them through the sales process and get them across the finish line.”
Getting ready to sell a business? Call Murphy Business at (727) 725-7090 to connect with a local business broker and learn more about our services.