A Seller's Guide: Should I Use A Business Broker?
For an owner of a business who has made the decision to sell, the question of whether to go it alone or use a Business Broker can have far reaching consequences. Whilst the thought of having to pay a commission to a broker is certainly not appealing to most business owners, it could turn out to be worth every penny. Here are some of the reasons why:
Business Valuation Expertise In order to get the best possible price for your business you need to know what it is worth. Many owners have invested extensive amounts of time and money into a business and, understandably, want to see a large return on that investment but a business will not sell for a price simply because you want (or need) it to. An experienced Business Broker understands the market, has access to statistics on recent sales, and can apply the various methodologies to guide you on an impartial basis to what is the most probable selling price. A business that is overpriced won’t attract serious buyers but an underpriced business means the owner is leaving money on the table and so it is important to get the valuation correct, and that takes experience and knowledge. Most owners will only sell a business once in their lifetime and so by trying to save money and do it themselves they are at risk of missing out on the true value. Business valuation can be a complicated process but a Business Broker has all of the tools needed to give you an accurate opinion of market value. Confidentiality
Selling a business is not like selling a house. You do not want to put a ‘for sale’ sign in the window that lets all of your staff, customers, and suppliers know that you are selling as this can have a significant impact on your business. Not only is confidentiality therefore key for a seller, it is also of importance to a buyer as they will want time to announce the purchase of the business in their own way and will not want this information to be made public until that time is right.
Maintaining confidentiality is a critical part of the role of a Business Broker and they know how to market businesses in a discreet manner. By identifying the business only to prospective buyers who qualify and have signed the required non-disclosure agreement the seller’s confidentiality is protected. A good Business Broker will handle all inquiries about the business and only release information at the relevant stages throughout the process, all the while educating genuine buyers and allowing the owner to continue running the business as usual to maintain the best possible sale price.
Business as Usual
Following on from the above point, it is vital that a business owner keep things running smoothly throughout the whole sale process in order to achieve the maximum price for their business.
Many times owners who try to sell the business themselves get caught up in trying to advertise, screen buyers, negotiate, deal with attorneys & CPA’s, handle a mountain of paperwork, and simply have no time left to run the business itself. This can lead to a downturn in performance and a lower price at the time of the sale – if in fact a sale is achieved as buyers do not like to buy a business that is showing declining numbers.
You are the expert at running your business and a Business Broker is the expert at selling it. Working together with a Business Broker as a team is the key to a smooth sales process.
Business Brokers have the latest sales and marketing tools available to them that will ensure your business gets the maximum exposure (in a confidential manner that does not disclose the business identity until an NDA has been signed as we discussed earlier).
A good Business Broker will undertake a multi-pronged approach to the marketing of your business that will cover the internet, business brokerage listing services, direct mail, email, digital marketing, and marketing directly to their database of existing customers. This range of tools combine to produce the best results in a far more efficient and effective manner than any owner could manage on an individual basis.
Once an interested party has contacted the Broker and signed an NDA they will then be presented with a Comprehensive Business Review (CBR) document. A Business Broker will take the time to create a clear and effective CBR that provides the buyer with a carefully crafted presentation package and gives them a more complete understanding of the benefits of acquiring the business. A strong CBR is a powerful tool in helping to sell a business.
Experienced Business Brokers will have developed a long list of possible buyer candidates. Sometimes the best buyers may not be actively searching on the internet for a business at the time yours is for sale, but by having a Business Broker who can connect you to off-market buyers your chances of a sale will increase. Also, a high number of buyers do not buy the business they originally inquired about, and so by working with a broker who has a substantial database of potential buyers you are guaranteed to reach more people than you would in trying to market the business yourself.
Negotiating the deal is another area where the Business Broker adds a great deal of value as they are experienced in doing this on a regular basis and are knowledgeable about price, terms, and other key aspects of the sale.
Using a Business Broker takes away the stress and the time it would take an owner to negotiate directly themselves, and allows the broker to act as a buffer between the parties where they can be the ‘bad guy’ if necessary. Selling a business can be a highly personal experience for an owner and so by having the broker act on your behalf it removes this element from the equation and will make the sale process potentially far less adversarial.
Experienced Business Brokers have access to a wealth of resources, and to professionals that can assist in every stage of the business sale process.
These professionals include attorneys, CPA’s, SBA lenders and other financial institutions, all of whom can help in getting a deal done. Brokers also have access to a large network of potential buyers, either through their own databases or via an MLS service such as the Business Brokers of Florida. A seller of a business should ask their potential broker whether or not they are willing to ‘co-broke’ (i.e. work with other brokers) as this will greatly increase the chances of a sale.
So, should I use a broker or not?
Obviously I am biased and so would answer this question with a resounding ‘yes’ but I do genuinely believe that a good Business Broker adds value to an owner who is looking to sell.
A broker can control the process from start to finish, beginning with the valuation of the business through the listing, marketing, negotiating, and closing stages of the deal. Selling a business is not a straightforward transaction and has many intricacies and pitfalls that an owner may not be aware of. Not to mention that the owner needs to stay focused on running their business on a day to day basis in order to ensure it sells for the best possible price.
If you do choose to work with a broker it is important to find one that you feel comfortable with. Make sure your broker is knowledgeable and has your best interests at heart by truly understanding your needs and goals. With the right Business Broker your chances of a successful sale greatly increase.
For more information about selling your business call me on 407-989-6893 or visit www.theharrisongroupfl.com
The Harrison Group at Rockrose Realty Inc.