Best practices for selling alarm dealerships

Retaining qualified representation can help sellers avoid many common pitfalls

"When you go to sell your company, you're going to have to do two things at once - run the company as you ordinarily would and you've got to go through the process of selling your company - which is an exhausting process," he said. "You could end up spending half a day on the phone with the buyer, your lawyer, the buyer's lawyer, and have to go back and turn to your business for the balance of the day. You want to be adequately prepared going into the process to make sure you've got good systems in place and have the data that the buyer is going to ask for."

Both Pritchard and Davis agree that dealers who are looking to sell need to retain legal help from those that have experience in the industry, not just a family or hometown attorney. Pritchard said he's been involved in negotiations where sellers have retained an attorney that specialized in divorce, DUI or personal injury rather than purchasing agreements.

"You don't know what you don't know," he said.

Also, because all of these types of deals are based on a multiple of recurring revenue, dealers need to understand the value of good recurring monthly revenue and not simply base their company's valuation on the number of accounts they have.

"If you don't have good recurring revenue, you're going to suffer," Pritchard said. You need to have good customers, good contracts and good systems in place. The RMR really is the lifeblood of what you're selling and you have to understand it. Plenty of times sellers don't' get paid for all of their accounts, only those that are deemed qualified."

Pritchard said that he advises sellers to perform due diligence on their companies prior to a sell as if they were buying it for themselves.

"The seller never knows as much about his company before he sells his company," Pritchard said. "The single most important thing in negotiating is information. Having it at your fingertips or having it where it can be easily accessible is beneficial."