Business Sale Broker Services and Advantages
A business sale broker should provide most services necessary to successfully sell a company. Ideally, they’ll lend their expertise or connect the seller with relevant experts for a smooth process that’s profitable for the seller and desirable for the buyer.
It’s a big job. Those who are up to the task should have years working directly with financial experts, business owners, entrepreneurs, and various professionals that help businesses grow and develop. Typically a business sale broker will work directly with small business and, occasionally, medium-sized companies. They operate with the primary goal of helping the owner save money and reduce the time spent handling these business dealings.
With the support of a business sale broker, a seller should expect a wide variety of services along with general guidance and assistance from any needed experts.
What is a Business Sale Broker?
A business sale broker is the intermediary assisting both buyers and sellers. Similar to a real estate agent, they provide insight into the process of the sale. The difference, of course, is that this broker coordinates business sales rather than mere property. They should have years of experience handling business sales for small and medium-sized businesses.
A business sale broker should establish an approximate goal for the exchange, advertise the opportunity, and give guidance throughout the business’s sale. While they don’t provide a
Sellers rely on business sale brokers to reach meaningful compromises or agreements during deal negotiations and provide acquisition services to buyers. Their experience and resources make the transaction happen.
Business brokers pull together the marketing package and attract qualified buyers that would also be a good match for what the seller wants to achieve. To attract the right kind of buyers, they’ll start with a confidential information memorandum.
Entice Buyers with a Comprehensive Outline of the Business
One of the biggest reasons that sellers turn to a business sale broker is to attract the right kind of buyers. Most business owners don’t want to sell their company just to wash their hands of it. Typically a business owner is selling the company and wants to see it continue to succeed. But fewer business professionals have the skill set and resources to properly cultivate that interest in their business.
The Confidential Information Memorandum, often called The Book, will include key details of the company. It should outline the elements of the business and describe its operations in great detail.
Business Details and Operations
This section is relatively straightforward. A broker would evaluate how the company currently operates and assess operational strengths, weaknesses, and opportunities. Within the CIM, the broker would directly address the company’s operational ability to achieve upcoming goals and meet financial projections.
Another primary factor of this section is scalability. If the company has room, or needs, to grow, then it must have buyers that can accomplish that growth. The scalability of operations can also come with high-demand on buyers and will undoubtedly impact negotiations and the final agreement.
Beyond the business and operations, the CIM or Book should contain an industry summary. Ideally, it will pinpoint where this company is compared to top competitors and analyze strengths and weaknesses within their industry. Finally, this part of the CIM should include industry opportunities and show how those align or fall-short with current company goals, projects, and operations.
In this industry section, a business sale broker may also include:
- Common industry barriers to entry
- Customer diversity in the market
- Growth opportunities
A company should always provide an analysis of historical financial performance as well as financial projections.
A notable missing piece in the CIM is that these books or guides will seldom include a purchase price. It is up to the potential buyer to take the information from The Book and value the acquisition or propose an initial offer.
CIM Concerns and Misconceptions
When working with a business sales broker, they should fully explain what the CIM is and what it is now. A CIM is not a pitch book, binding contract, or an offer, and it is not a valuation. Business sale brokers don’t set the price, and they don’t use the CIM to establish a price.
What should a seller expect after your business sales broker puts together the CIM? The seller should expect them to market the company and vet potential buyers. Then, they would begin negotiations and structure the deal.
Negotiate and Structure the Deal
Through a broker and with a complete valuation, the seller can have a firm footing for negotiations. The broker would handle communications with potential buyers who’ve placed a bid. Then, when an appealing potential buyer submits a desirable bid, negotiations can begin.
It can take an extensive amount of time to find the right buyer, and many business owners push the business onto an unprepared buyer. The broker serves to help maintain the idea of finding the right buyer, not just the first qualified buyer that comes along.
Brokers also evaluate potential buyers for sufficient financial resources and determine if they’re qualified to run the company. They look at whether potential buyers have access to the necessary financing or funds and whether that transaction will go smoothly.
Negotiations are where brokers really shine. They keep the focus on the deal, rather than the emotions and nitpicking that can come with selling a company. Brokers stand in as the middleman to resolve problems that arise.
In addition to structuring the deal, they should provide the key people necessary to execute this plan. Business sale brokers usually have an extensive network of resources, including connections or business relationships with finance professionals, attorneys, accountants, and other professionals that may come up during the sale.
Who Needs a Business Sale Broker?
Anyone looking to sell a small or medium-sized business should consider a business sale broker. These are typically retail shops and B2B companies that produce less than $25 million in annual revenue.
Brokers provide many services that a business owner simply can’t manage on their own while also running their company. Marketing the business, assessing the qualifications of potential buyers, arranging for all the legal elements, and handling negotiations take years of skill to execute.
A well-seasoned business sale broker should:
- Read the market to know when it’s a good time to sell.
- Know which buyers have the resources and which don’t.
- Arrange for marketing to show off the company’s hard work over previous years.
- Manage confidentiality if business owners aren’t ready to tell customers, staff, or vendors.
- Work to achieve a fair deal.
Most business owners need to accept that they’re experts at business operations, not necessarily selling their business. They know how great their company is, and all the potential growth and success lay in the future—putting that knowledge to paper in a compelling way that invites the right people and negotiating for maximum value, and an ideal transaction is not the same thing as running the business.
Owners run into common problems such as not waiting or finding the most qualified buyers, cannot keep the sale confidential, and stumbling into legal issues. Transfers of permits, securing proper licensure or insurance for the new buyer, and the transaction itself can all come with serious legal holdups.
What Are the Advantages of Using a Business Sale Broker
The clear benefit is that the seller and buyer are working with a trained professional. There is an expert coordinating all the moving parts of this process. They strive to keep the company looking good to buyers and keep the process moving forward for the buyer and the seller.
For anyone looking to sell their business, a business sale broker is one of those justifiable decisions. They may save the business owner time, get them a better deal, find a more qualified buyer than the owner could have, and spare them endless amounts of frustration.
The prowess in marketing and negotiation tactics alone often make business sale brokers worth their weight. For the seller’s end, negotiations become extremely simple. They handle the back and forth between bidders, do the research, and then report on who can meet the seller’s needs and expectations.
Perhaps one of the most significant advantages of using a business sale broker is in price and deal terms assistance. Brokers know the regulations that impact the sale and the company. They should have the solution for any legal red tape and keep the process moving. This legal knowledge also helps avoid wrecked deals.
The protection against problems or delays is substantial. Delays in a sale can lead to the owner pulling the plug and potentially missing a good deal. A BizBuySell survey found that about half of brokers recommended that sellers expect their listing to stay on the market for six to 11 months. Whereas most owners believe they can complete the process in less than five months.
Relying on a business sale broker allows a business owner to have realistic expectations, set clear goals, market the business, and negotiate for desirable sales terms. Anyone interested in selling a small or medium-sized business should consider contacting the business brokers at American Fortune. Experts in managing the business sale process.
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