A Business Broker Can Help You Get the Best Deal When You Are Planning to Sell Your Business

A business broker is a firm or a person who assists buying and selling process of small businesses. If you are planning to sell your business, the right business broker can help you get the right price for your business of which it is worth.

A business broker is much more than just a middleman. Apart from exposing you to the vast pool of potential buyers of your business, most brokers also help in facilitating various transactions involved in the buying-selling process. Selling any business is a complex process and is extremely difficult to be carried out own your own.

Taking professional help will let you concentrate on your business till it is completely sold, while the broker will be involved in searching the right buyer for you. This will help to get rid of a lot of unnecessary worries.

Here are some reasons, why you should hire a business broker, if you are serious on putting your business for sale:

  • The know-how of the market and current worth of a business is crucial before you try to sell your business. Brokers are usually quite knowledgeable in this area and can usually derive an appreciably accurate value of your business.
  • Business brokers know how to package your business the right way and present it in a manner that would attract the buyers.
  • The database maintained by these brokers make it easier for you to find the potential buyers. If you find a listing in the ‘business for sale’ records of their database, a lot of buyers would be able to find you, if they are searching for something similar to what your business has to offer.
  • Confidentiality is one of the most important aspects that a business broker provides to its client, so that the present scenario of the business won’t be affected and the rivals and competitors of the enterprise don’t come to know that the business is for sale.
  • Business brokers are well equipped with the skills of converting seekers into buyers. For an individual it is very difficult to create competition among potential business buyers and competition is what fetches the best price in most cases.
  • The whole process, as we all know is quite complicated and many a times requires compromises on the sides of both the parties. A business broker acts as an intermediary and makes sure that best deal occurs between the two.

How Business Brokers Help Sell A Business

Business brokers play a vital role in the successful sale of a business. While it is possible to sell a business directly when you already have an interested buyer, a competent broker will make the process smoother and more professional. When you are selling a specialist business, or a quality business in a specific industry sector, you need access to the contacts they provide. It is here that a quality business brokerage really proves their worth, connecting sellers with screened, pre-qualified buyers and acting as professional intermediaries throughout the selling process.

Establish realistic market value
The first thing business brokers will do is to carry out an appraisal of your business and advise you on its realistic market value and a fair but profitable selling price. While many elements have to be taken in to consideration, the value will be founded on a review of tax returns and financial statements, with a cash flow analysis prepared by an accountant.

Marketing campaign
Your business brokers will advise you on a marketing campaign for your business and prepare a professional information pack. Depending on the brokers you choose they may already have a contact list of potential buyers from relevant industry sectors.

Pre-qualifying buyers
Before introducing you to potential buyers of your business, your brokers will pre-qualify them to make sure they meet the prerequisites. They will ensure that the potential buyer has sufficient liquidity of funds to be able to put down roughly 50% of the purchase price in escrow. They may also provide the buyer with the necessary documentation for a lender to approve a loan, if one is needed for the rest of the funds.

Facilitate contract negotiations
Business brokers play an invaluable role during contract negotiations between buyer and seller. Their legal teams provide professional advice and an objective perspective throughout the process, from the initial discussions to the drawing up and signing of the contract.

Where to find good business brokers
As with all professionals, you want to find a brokerage with a good reputation for dealing in quality businesses. Ask for recommendations from your trusted financial professionals such as accountants and lawyers. They are likely to have regular dealings with brokers in your local area and should be able to recommend one that will suit your business. There are business brokers that specialise in small businesses and others that deal only in top quality businesses with a certain profit level. Choose the best match for your business for optimal results.

Selling a Business? What Not to Expect From a Business Broker – Part 2

In the first part of this article I gave some examples of what not to expect a business broker to do when selling a business. In the second part I cover more no-no’s when working with business brokers.

Some business owners look to have multiple brokers work on selling their business. We refer to this as an open listing. This can lead to many headaches for the owner. Most of my clients want the selling process to be kept confidential and an open listing does not allow them to pin point any breach in confidentiality. If five brokers are working on a listing who will you turn too when a potential buyer breaks confidentiality. An open listing also invites broker law suits when it comes time for closing. Two business brokers can claim a buyer is theirs which can ultimately delay a closing. It is understandable that a business owner is concerned that a business broker might not give their business enough attention and a nine to twelve month agreement might make them uneasy. I usually give my clients an out after a reasonable period time if this is a concern. I do point out that the average business takes approximately nine months to sell.

Some times when I meet with a seller they make commission requests that are not realistic. Some sellers suggest that I can keep any amount over their target sale price. This is called a net listing which is illegal in many states due to business brokering falling under the state’s real estate commission. It also paves the way for the broker to give an unrealistic selling price to increase the size of their commission. It also causes disagreements when offers come in under the target price.

Some business owners have no problem with a straight percentage commission, but they ask me to add my commission in the asking price. Although this is a legal away around the net listing it creates other problems. By adding the commission to the selling price you are increasing the selling price above what the market will bear. This will reduce the amount of people looking at your business and ultimately take longer and the end result will be the business sells at the market price anyway. There is nothing wrong with starting a little high, but you have to be willing to drop the price if the market dictates this.

A seller should not expect a broker to work on verbal financial figures. Sometimes when I meet a business owner they don’t want to provide tax returns or financial statements. A proper valuation is performed from P&L statements and tax returns. A good business broker will be able to re-cast the P&L or tax return to show the true cash flow of the business. As noted earlier buyers are more sophisticated and want to see accurate financial information before buying a business.

Business brokers provide a valuable service to business owners selling their businesses. An experienced business broker should make the process easier (although it is never easy) for their clients. Having realistic expectations of their services should make the process smoother for an owner selling a business.