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.

Selling a Business? – 10 Reasons Why You Should Consider Using a Business Broker

After 20 years in business the owner decides that it is time to sell his business. He thinks about calling a business broker, but decides to sell it on his own and save the fee that he would have to pay a business broker. Is this a good decision? I think if you interviewed the majority of owners who have attempted to sell their business on their own they would tell you that this is was necessarily the best decision. As a business broker I can tell you that close to half the calls I get are from business owners who attempted to sell their business and realized it is best to leave such an important task to a professional.

I can also tell you that if you interviewed the majority of my clients they would tell you that I must be out of my mind to be doing this for a living. Once they go through the process and see what it takes for a business to successfully change hands they have no problem what so ever signing my commission check at the closing. Let me give you ten reasons why my clients will tell you that if you are seriously considering selling your business you must retain an experienced knowledgeable business broker:

* Time Savings – Most business owners spend the majority of their business day managing their businesses. Selling a business is what business brokers do full time. Qualifying and working with buyers is a time consuming tedious process. An owner will have to make a compromise in the time that they normally dedicate to running their business.

* Experience – A broker has the knowledge and experience of selling businesses. Having this on your team will only increase the chances of getting the most value for your business and making it to a closing.

* Realistic Valuation – It is my experience that most business owners feel their businesses are worth a lot more that what the market dictates. When one goes to market at a price that is too high they risk losing many qualified buyers. This will also increase the time it takes to sell their business. In some cases an owner will price their business too low forfeiting dollars on their selling price. An experienced business broker will perform a market valuation so the asking price is realistic.

* Marketing expertise – A good business broker knows where to and how to advertise your business. They have databases of buyers of which many might be looking for a business like yours. They also proactively know where to find buyers that might not be looking at your ads.

* Financing – The majority of business sales involve some sort of financing. Very few buyers are all cash. A good business broker has banking contacts that will enable deals to get financed. They also can advise you about seller financing.

* Negotiations – In every transaction there are negotiations. Negotiating on your own behalf is similar to the saying “a lawyer that represents himself has a fool for a client.”

* Buyer experience – Most business buyers are first time buyers and do not have experience. A good business broker works and nurtures their buyers to make sure they make it to the finish line and close. They help them obtain financing and facilitate due diligence.

* Confidentiality – Most business owners are very concerned about confidentiality in a transaction. They do not want their employees, customers, vendors, and competitors to know they are up for sale. An experienced business broker is accustomed to taking all precautions in keeping the sale confidential.

* Closing deals – I always tell my clients not to get excited when I bring them an offer that they are pleased with. A good business broker earns their stripes getting a deal from accepted offer to a successful closing. So many obstructions present themselves during this process and a good broker will constantly be thinking creatively to move deals along to the finish line.

*Business brokers work for free – That’s right, most business brokers work on 100% commission so if they don’t find a buyer they do not get paid. Do you know a lawyer, accountant, or a consultant that will work on your behalf and in some cases for up to a year and possibly not get paid?

Selling a business is the most important decision many entrepreneurs make in their lifetime. Their companies in most cases represent the bulk of their net worth as well as the majority of their retirement savings. Is it really something they should risk by trying to sell on their own?