Have the right exit strategy
to successfully sell
The time has come. Your brokerage
or correspondent lending company is
profitable and established. You are debt free.
The market is improving. It is time to cash in on
your small business.
If this is the first time you’ve considered your exit strategy, however,
you already may be at a disadvantage. Often, the best exit strategies
are built into a company’s initial business plans. Selling a business
— especially in the mortgage industry — is a process with multiple
moving parts. Optimizing your return while securing a buyer is no easy
task. This requires your business to be the best that it can be, making
the investment a low-risk proposition for your buyer.
If you haven’t sold a business before, it’s a good idea to get some
help. In fact, even if you have sold a business in the past, expert
advice and evaluation still can help you distance yourself from the
natural bias that comes from building your own company, as very few
professionals can evaluate objectively the businesses they’ve built
with their own hard work.
Of course, finding the right partner can be a challenge in and of itself.
With that in mind, as you set out to evaluate consultants, consider the
• How much experience do your candidates have in selling your type
of business? How much success have they had in your market?
• Will they allow you to check their references? If not, be wary.
• Will you be working directly with the consultant you’re considering, or will you be working with a partner or a junior associate?
• How comfortable are you with a given consultant? Is this person
willing to tell you things that you may not want to hear, and are you
willing to hear those things and adjust your actions accordingly?
In other words, do you trust your adviser?
Once you’ve settled on a company or consultant to help you sell your
business, it’s time to determine your market and your value. Your expert
should be able to help you do this by asking — and independently
considering — the following questions about your organization:
• How well-integrated are your departments?
• Do you use first-rate, up-to-date technology? Is it adequately imbedded to ensure efficiencies in your workflow?
• What kind of quality-control measures do you have in place to
protect your business, as well as your customers and secondary-market investors? Are these measures as strong as those used by
the organizations that are thinking about buying your business?
• How solid are your third-party vendors? How well have you vetted them? What protections does your business have in place regarding those vendors?
• can you produce a current business plan? Do you have written
operational procedures in place? Are they up-to-date?
• if you own a correspondent lending company, does your secondary-market department maximize your profitability?
• Do you have a committed management team that can run your company in your absence? Do they have any portion of ownership in the
organization? Will there be a viable business in place after your exit?
The key to answering all of these questions is to think like your
buyer. Your quality-control processes and operating procedures will
be reviewed against a universal standard, and deviations will not be
explained away easily. remember, the majority of purchasers are
risk-averse. Most investors and buyers are not looking to take on
Assuring your buyer
Your buyer likely will be interested in your company’s past performance mostly as a predictor of future performance. It will be your
job — and your agent’s job, as well — to convince a potential buyer
that past successes are replicable and sustainable, and that past
stumbles are merely aberrations that have been addressed since they
A savvy buyer will scrutinize your sales processes, key managers,
vendors, customers, operational processes and much more.
Accordingly, you’ll need to be able to demonstrate that, with increased
capital, you could improve your returns dramatically using your existing sales process. You also should convince your buyer that your product lines can adapt to meet changing needs. The mortgage industry
remains a volatile place, so flexibility has become one of the most desirable assets for buyers.
Finally, as with any sale in any market, you should prove that your
business is attractive to other buyers, as well. Your consulting company or agent should be skilled not only at bringing potential buyers
to the table, but also at holding their feet to the fire. There are few
things less frustrating than a prolonged, erratic due-diligence and
purchase process when it comes to your own business.
closing the deal
This is another area in which having an experienced agent or consultant can be helpful. It can be stressful and difficult to engage in a
hard-hitting negotiation, and sometimes your emotions can get the
worst of you when it comes to maximizing your return.
This isn’t to suggest that you should be aloof from the negotiation process, but it may be to your benefit not to be the primary
voice at the bargaining table. If you have chosen well with regards to
your agent, less will be more when it comes to your voice. Save your
emotions for your conversations with that agent — behind closed
doors, of course.
• • •
Selling a business is not like selling mortgage loans. Unfortunately, too
many brokerages and correspondent institutions attempt to undertake
their exit strategies with the mistaken assumption that they are ready
for the process. To maximize your return, you'll need planning, patience
and expertise, as well as a great deal of trust in your partner. The pro-
cess is rarely easy, but if it is done well, it will be worth it. •
Robert M. Rubin is the principal of Southfield, Mich.-based
The Business Loan Connection, a brokerage that brings together
mortgage-lending companies issuing and using warehouse-
lending facilities. He has been involved actively in the mortgage
industry since 1964 and has run a successful mortgage-lending
business for 30 years. He also has been active within the Mortgage
Bankers Association and the National Home Equity Mortgage Association.