Hire A Business Broker For A Successful Business Sale
Sometimes a business seller asks, “Do I really need to hire a business broker to sell my business?” Given the complexities of a business sale, the number of individuals that participate, the risks involved, the infinite number of details and timing factors, I’m always a little astounded by the question. Don’t get me wrong — it’s a fair question but from my perspective and experience, my response is how can you not have a broker sell your business.
Obviously, perspective is everything. Often, those sellers who ask that question have a DIY-mindset which is commendable. They know that with effort, focus and time, they can accomplish much. Others equate business brokering with real estate sales and think that if they can sell property, they can sell their business. This may very well be true….on a rare occasion. Given our experience, however, and admittedly our bias because of our experience, we think going to market without a broker is a major disadvantage. Why? Perspective is everything.
An educated, licensed, trained and experienced business broker is worth their weight in gold. They will facilitate all the necessary processes and stages for selling a business. They will organize key records and information. They will determine the likelihood of sale, probable selling price and qualify the right buyers. Highly skilled business brokers will leverage their knowledge, skills and connections to strategize and maximize the likelihood of a business selling. Given most are paid on commission, it makes zero sense to go to market without one.
Most Small Businesses Don’t Sell
It’s important to understand that most small businesses don’t sell. They don’t sell for a multitude of different reasons. The estimation is that upwards of 80% of businesses don’t sell. This is disappointing to say the least but it’s also why business brokers should be hired to sell businesses. Business Brokers know what sells, how to sell and how to trouble shoot the myriad of issues that inevitably arise in every business sale. Every. Business. Sale.
Sometimes a business does not sell due to underperforming elements of the business itself. This would include poor financial performance, unstable staff, unreliable key employees. Sometimes the issues pertain to the business’ financial performance such as being undercapitalized, or it’s marginally profitable, etc. Sometimes, it’s a good business but it’s poorly marketed.
Additionally, buyers tend to be wary of direct business sellers and may find a third-party representative, like a broker, more comfortable to interact with in a business sale transaction. Conflicts happen. Awkward interactions can derail a sale. Business Brokers streamline transactions, offer creative problem-solving and prevent issues from blowing up deals. They facilitate sales by minimizing friction and maximizing resources/support throughout the process.
Top 21 Reasons To Hire A Business Broker
So how does a business broker facilitate a business sale and earn their commission? The following are the top 21 reasons we think make what we do valuable to our clients and why you should hire a business broker in the acquisition or sale of your business. We hope you agree.
- Business Brokers determine whether the business is sell-able. This is key. Why go through the bother of trying to sell the business, particularly when it involves opening your books and records to prospective buyers when the likelihood of a sale is unrealistic. From a seller’s point of view, they may delude themselves into thinking their business will sell but from our point of view, we will size up a business’ desirability and where it’s lacking, we’ll advise our sellers on what needs to happen to make the business sell in the future.
- Business Brokers advise on what needs to be done to increase the seller’s chances of sale. Whether it’s to amp up online marketing, clean up appearances, sell off inventory, etc., a business broker can make valuable suggestions to a seller to prepare for sale and optimize the value.
- Business Brokers will determine the Most Probable Selling Price (MPSP) by valuing the business. Business Brokers value many more businesses than they accept or sell. They have training in determining valuation via the primary valuation methods including Asset Value, Seller’s Discretionary Earnings (SDE), and Earning Before Interest Taxes Depreciation & Amortization (EBITDA).
- They will value the commercial real estate associated with the sale of a business.
- Business Brokers package the business listing for sale. They will organize all the key documents and records to market the business, prepare the business for buyer’s due diligence and to transfer all assets upon sale.
- Business Brokers market business sales anonymously. To protect the seller from undue, unnecessary and premature disclosures of business information, the Broker will guard all key identifying information, including the name of the business to guard against information about the business owner’s intent to sell the business. Should employees, competitors and/or vendors learn about the business sale, they might undermine the sale or take advantage of it.
- Business Brokers market the business for sale to the general public. Through various business listing services, Brokers will market a business online to maximize attention.
- Business Brokers market the business for sale to the Broker’s list.
- Business Brokers market the business for sale via email blasts to their list and professional associations. Most Brokers have a marketing list of interested buyers and will send their list an email blast with new opportunities. Mission Peak Brokers has a buyer list of thousands of individuals and issue email blasts for every new listing.
- Business Brokers market the business for sale via social media. Successful Brokers have a strong online presence and will advertise their business opportunities on their social media such as Twitter, Facebook, LinkedIn, YouTube, Google My Business, etc.
- Business Brokers quality prospective buyers. Before sharing any information, Brokers will get a Non-Disclosure Agreement and information from the buyer to make sure that they are financially and operationally qualified to buy the business.
- Brokers will assess the buyer’s fitness for the business. To properly run the business, the seller and lender often have specific requirements to assure a successful transition. The Broker will be able to vet prospective buyers in order to identify only those that reasonably qualify.
- Business Brokers facilitate seller and buyer meetings & interviews. When the parties start engaging each other, they do well when a third-party is available to manage meetings, provide information in a timely and sequential manner and prevent any initial conflicts from boiling over.
- Business Brokers negotiate price & terms. Given their experience, Brokers can offer guidance, insight and support to the parties in facilitating deal-making to create a win-win outcome.
- They will oversee due diligence and secure all records. Read all about that here.
- Business Brokers secure financing for the business sale. Whether it’s getting a bank loan, working with the seller to offer financing or working with hard money loans, the Broker will prepare for the business sale by getting financing in place.
- They will connect parties to relevant trusted advisors such as accountants, attorneys, insurance brokers, exit planners, etc.
- Brokers work with third-parties to facilitate the business sale, such as franchisors. Oftentimes, third-parties are involved in the business sale process. The Business Broker will include them in the communication and determine what their needs/involvement will be and assure that their interests are fulfilled to facilitate the business sale.
- They will work with landlords to facilitate lease transfers or write a new lease for buyers. Often the bane of most Brokers, landlords can easily derail business sales. Brokers know how to work with them in order to get the lease component of the sale properly handled to each parties’ satisfaction. Where a new lease is needed, licensed Brokers can negotiate new lease terms and value property.
- Business Brokers manage the orderly transfer of the business and troubleshoot issues that arise. Once the deal is done, the transfer from seller to buyer takes place. Conflict in this process can undermine the process. Brokers can help minimize conflict by supporting the parties in the transfer, trouble-shooting issues and minimizing unnecessary ego entanglements.
- Business Brokers sell businesses. They know the sales process and how to streamline a sale which saves the seller and buyer time, guesswork and the risk of litigation. Most importantly, they do the work that it takes to get the deal done. In so doing, the Broker’s work allows the seller and buyer to focus on what they do best which is running the business.
Ready to hire a business broker? Mission Peak Brokers is here to help you sell or buy a business. Contact our office to schedule a consultation regarding your entrepreneurial interests and how we might be able to assist you to achieve your goals.