What Kind Of Tasks And Functions Does a Business Sale Broker Perform?
If the business you want to buy or sell has dozens of employees or annual revenues in the multiple millions, you would benefit more from the services of an M&A Company, Business Sale Broker or an Investment Banker, but the majority of businesses which change hands every year are smaller, ordinary retail or main street businesses with a handful of employees and annual revenues under two million dollars. These small businesses are the ones which can benefit from the services of a good Business Sale Broker.
Business Brokerage is basically like real estate brokerage, but with the added complexities of tangible and intangible assets (including goodwill and reputation), financials, accounts payable and receivable, revenues, loyal customers, businesses systems, employees, market share, and various other factors. A good Business Sale Broker can save valuable time for both buyers and sellers by working to coordinate all the necessary issues and matters directly or indirectly involved in making a business purchase or sale come together successfully. Another important factor when brokering a business for sale is the consideration for confidentiality. While small businesses are often listed for sale in a more open fashion than larger businesses, many sellers are looking for discrete transactions and appreciate a Business Sale Broker who can facilitate the business sale process in a confidential and professional manner.
Benefits of a Business Sale Broker, as a third party in the transaction.
Business sellers and business buyers usually approach a business from very different perspectives, with their own interests in mind. They can be blind or biased with regard to important factors, and can be abrasive to each other. A business Broker’s job is to bring the two together in the first place, and to help them reach an agreement. An experienced Business Sale Broker knows what kind of information each party needs to share and see, what aspects are likely to be important to each party, and how to prepare and present the facts in a way which leads to an agreement on the value of the business and the terms of the sale.
If you are looking to buy a business, a Business Brokerage company can help you discover the business that is right for you. Just like a realtor who has examined each property in the process of listing them, Business Sale Brokers have more knowledge of the businesses available than appears in a summarized list. Explaining your reasoning behind what type of business you think you are looking for, can help your Business Sale Broker either narrow the list of choices for you, or highlight a business you may not have realized might be ideal for reaching your goals.
Another consideration about buying a small business is that the seller is often the person who started and built the business, is emotionally attached to it, and has probably never sold a business before. You might think that means you can easily take advantage of them to get the price and terms you want, but it might just as well mean that they can be easily offended, and by shear inexperience they may inadvertently make the process more time-consuming and frustrating than necessary; they may even refuse a fair offer if they don’t understand it or recognize its fairness in light of the marketplace. This is where a good Business Sale Broker can save you time and energy, allowing you to focus on more profitable or pleasurable activities. It is the Business Sale Broker’s job to help the seller understand what is typical, appropriate, fair, and reasonable regarding financial documentation, business valuation, presentation, payment terms, and deal structure. A good Business Broker knows how to present the needs of the seller and the buyer to achieve mutual cooperation.
If you are looking to sell a business, a good Business Brokerage company can do more than simply add your business to a list of businesses available for sale. A good Business Broker can help you understand what buyers are looking for, what specific information you should prepare to show a potential buyer, how to best format that information, how to calculate the value of your business according to industry standards and market conditions, and what key aspects of your business to highlight in order to attract the best buyers and get the highest price possible. A good Business Broker can help you prepare by showing you how to look at your company from a buyer’s perspective, helping you to emotionally detach from your business so that you can recognize and accept a good offer when you receive one. An experienced Business Broker can also help facilitate a sale by presenting your business in a professional manner, and helping to handle negotiations in a manner which engenders respect and cooperation from potential buyers. Enlisting the services of a good Business Brokerage company to handle a lot of the work related to selling your business can allow you more time to run your business, thereby maintaining its value until the right buyer is found, and can prevent wasting your time with unqualified buyers.
A good Business Sale Broker never forgets that it is their job to prepare and assist both the seller and a potential buyer in coming to mutually acceptable terms, as smoothly and quickly as possible.
A word of caution when using a Business Broker
The fact that a Business Sale Broker doesn’t get paid unless the buyer and seller close a deal, is generally a good incentive for the Business Sale Broker to actively seek qualified and interested buyers, and work to prevent a deal from falling apart after a letter of intent has been signed. Additionally, the fact that a Business Sale Broker’s commission is usually calculated as a percentage of the sale price appears to be a good incentive for the broker to work to ensure that the seller receives maximum value for their business. However, there is always a temptation for an inexperienced broker to focus too much on the closing price of the business in the hopes of receiving the largest commission. The problem lies in the fact that a buyer and/or seller may see advantages in a lower total price when other considerations are factored in, such as tax implications of the payment terms. However, a wise Business Broker realizes the long term value of a buyer and seller who are both comfortable with the deal that is brokered and positively impressed with the assistance provided by the broker.
The main thing you want to find out is what your broker will do to try to ensure that your business is not one of the majority of businesses which fail to sell, or that sell below their true value. There can be many reasons a business fails to sell, among which are incorrect valuation, not reaching appropriate buyers, poor presentation, failing to see a buyer’s perspective, un-professionalism in dealing with potential buyers, lack of effort to reach compromises or develop acceptable terms, and failing to accept a good deal because of being too attached to certain goal points or seeking a price above what the current market will support.
Ask the Business Sale Broker you are interviewing, about their track record regarding the number of businesses they have represented compared with the number of business sales they have actually close on, and the prices they have actually gotten on those closings compared with the original asking prices and market trends. Also ask the Business Broker about their history in brokering businesses of your industry type. For example, a Business Sale Broker who typically handles retail stores may not be knowledgeable enough about the tech industry to achieve ideal results if attempting to handle the sale of an ezine or an app-based business.
You want to know what services a particular Business Broker can perform for you beyond posting a basic listing of your business. What will they do, or what skills do they have, which might set them apart from their competition? While you might find several Business Brokerage companies which appear to offer comparable services, you will want to pick the one Broker who seems most capable of conveying to buyers the advantageous characteristics of your unique business, and who has the people skills and business skills to effectively negotiate a winning deal for you.
A good Business Broker will:
• Know things about the process of selling a business which an average business owner does not know.
• Provide valuable assistance in determining a fair price.
• Provide a professional and attractive listing and teaser documentation for your company.
• Be proactive in contacting potential buyers.
• Have access to a large number of potential buyers.
• Likely have familiarity with a number of investment buyers–which have more resources than individuals.
• Provide valuable assistance in preparing a professional presentation which follows industry standards as well as highlights your business’s strengths.
• Have negotiation skills for successfully completing a business sale without losing the interest or patience of a buyer.
To learn more about business brokerage services refer to: Alliance of Merger & Acquisition Advisors (AM&AA), International Business Brokers Association (IBBA), NEBBA Professional Association for Business Brokerage, Midwest Business Brokers & Intermediaries (MBBI) mbbi.org
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