10 Reasons to work with a Business Broker

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10 Reasons to work with a Business Broker

10 Reasons to work with a Business Broker

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Home Page > Business > Sales > 10 Reasons to work with a Business Broker

10 Reasons to work with a Business Broker

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Posted: May 16, 2009 |Comments: 0
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If you are looking to list your business for sale, there are several reasons to work with a qualified business broker. Here is a checklist of 10 reasons why business sellers should work with a business broker:

1. Pre-sale issues. Oftentimes, business owners think that selling a business is as simple as selling a piece of real estate. Unfortunately, this is usually not the case. Selling a business can take much longer and the process is generally much more involved. A business broker can help from the outset by working with the seller on ‘pre-sale’ items such as giving advice on the financial information that will be required, documentation and other pertinent business information. A business broker can also assist in making sure a business is properly presented in its truest and best light – prior to the actual selling process.

2. Help determine a selling price. Determining a selling price is one of the most confusing issues that business sellers can deal with. A business broker can assist in determining a fair selling price for the business. Quantifying the market value of a business is usually much more involved than doing so for a piece a real estate and a professional business broker can help in the valuation process. There are different valuation techniques that are relied on and decisions must be made on what is actually being sold (for instance – is it a share sale or an asset sale? How will inventory be handled? How will working capital be transitioned? How is work-in-process to be accounted for on closing? …and so on.)

3. Maintain confidentiality. When business owners decide to sell their business they usually want to maintain confidentiality of the business. They don’t want their employees, vendors or competitors to know that the business is for sale. A business broker must maintain the confidentiality of the business while finding a number of qualified potential buyers to view the business, in the strictest confidence.

4. Marketing the business. Marketing a business for sale is a unique skill that a qualified business broker can bring to the transaction. Confidentiality must be maintained but the business must also be aggressively advertised in order to find enough potential buyers. This paradox must be overcome by a skilled business broker in order to generate enough exposure to sell the business. Marketing the business involves advertising it, working the broker’s existing network, preparing an information package to present to business buyers and getting to know the business intimately enough to be able to speak intelligently about it.

5. Find buyers. One of the main duties of a business broker is to find buyers. Usually, there are many, many more ‘tire kickers’ who are curious about the business but have no intention of actually buying it. A skilled business broker must sort through actual potential buyers vs. the ‘tire kickers’. (which leads us to the next point).

6. Qualify potential buyers. A business broker must find a suitable number of buyers but then must “qualify” them in order to find people that are actually interested AND capable of buying the business. Qualifying buyers is a critical part of what a business broker does. The broker must determine if they have the desire, skill and financial means to actually purchase the business. Qualified potential business buyers will be asked to sign a non-disclosure agreement, they will then be presented with a high-level outline of the business. Detailed business financials are not given at this point.

7. Present the business to buyers. Showing a business to a potential buyer is a major role that the business broker plays. Typically, the business owner is present and the business broker facilitates the communication at this point.

8. Facilitate the negotiations. If the business buyer is interested in putting in an offer on the business, the business broker will facilitate the offer process). Typically a ‘conditional’ offer is submitted, with a refundable deposit.

9. Managing the due diligence process. During the conditional period, due diligence is usually performed. At this point the business buyer will want to verify facts, dig through the financials and confirm exactly what they are buying. It is a ‘homework’ phase where buyers take a detailed look at what they are buying. A business broker will assist in facilitating this process.

10. Keeping emotions in check – on both sides. One of the most important roles of a business broker is to keep emotions in check (on both sides of the transaction) and keep constructive communications flowing. Sometimes during a deal buyers and sellers can let emotions get in the way of rational business decisions. A business broker plays the part of the intermediary to keep the lines of communication open to avoid misunderstanding.

The value that a business broker brings to a business sale transaction is multi-faceted. Oftentimes, finding the right buyer is really only half the work. Business sale transactions all too often fall apart for the wrong reasons – a skilled business broker is there to ensure that it succeeds for all the right reasons.

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Anne Brown -
About the Author:

Ontario Business Brokers

Business for Sale in Toronto, Hamilton and surrounding areas in southern Ontario, Canada. We are a full service business brokerage here to help you buy or sell a business.

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Article Tags:
business broker, marketing a business, business for sale