Role Of Business Brokers In Selling A Business

Role of business brokers in selling a business is more important than buying a business. However, there are people who do not understand the importance of the role of business brokers when they decide to sell their business. Irony is that some people are happy with giving more time to the selection of a coffee machine rather than to choosing the right business broker. This is a big mistake on their part and can result in not only the loss of money and time but also sometimes resulting in inability to find any buyers.

Here are some points to consider when you choose the business broker for selling your business. However, it is not possible to get a broker who has all the qualifications yet you must look for experience, knowledge, reliability and compatibility with you.

Reliability:
Reliability is essential because the role of business broker in selling a business is very important. How can you judge whether a particular business is reliable or not? The best method is to contact the references given by the business broker. They are in the best position to tell about how the business broker performed the deal. Ask them whether they are satisfied with the role of business broker or not. Also, make sure that the business broker you are going to hire has the capability of taking the transaction to the end and can follow up.

These references can also give you indications regarding the price they got for selling their business. Could they get the price they were expecting? Also, ask them about the consistency of the business broker with the plan charted out in beginning. They can also tell about the level of knowledge the broker has and his capability of providing the right advice. One very important question that you can ask is if need be would they like to hire the same broker again or not. The answer to this question can help you in taking decision quickly regarding hiring the business broker for selling the business.

If the business broker you are going to hire for selling the business belongs to the association of brokers then this is a point in his favor adding to his reliability. This is because the Associations such as International Business Brokers Association apply very strict ethical rules. Similarly, you can gauge the level of the knowledge by asking some questions. The business broker should not only have completed formal education to perform his job perfectly, but also need to keep himself informed about the changes in the particular industry.

Finally, a tip regarding experience of the business broker you are going to hire. If the business broker has ever owned a business then he is a better choice than the others who never run any business.

Selling a Small Business With a Business Broker

If you are a business owner thinking that the time is right to sell, there are a few options that are open to you. Usually though, it boils down to selling the business privately or using the services of a business broker. This article will focus on a few items to bear in mind if you do decide to sell your business with a business broker.

Patience. It takes time to sell a business. Most reputable business brokers are constantly being approached by small business owners who would like to sell a business. Unfortunately, many of these businesses are losing money or are very difficult to sell for a host of other reasons. Business brokers usually turn down more business listings than they take on. Even with this being the case, it usually takes several months for a business brokerage to find a buyer for a company listed for sale. Many times, business owners that have “just listed” their business with a professional business intermediary expect rapid response and a lineup of buyers hoping to view the business. Things don’t usually work this way, unfortunately. If you have decided to list your company with a business brokerage then there are many positive benefits you can expect from the relationship. However, please do be patient.

Multiple Showings. After you enlist the services of a business brokerage to sell your small business, don’t expect the first buyer to be shown your business to be “the one”. Often, it takes showings to 10-12 different ‘qualified’ buyers before a purchaser of found. Sellers tend to get excited at the first showing of the business to a prospect but the reality is that it many take many different people to see the business. There are times, however, where the first person who sees the business ends up buying it so please take these comments with a grain of salt.

Expect False Starts. Selling a business sometimes means being expected for a few false starts. When a business is sold, the first step is (usually) the conditional sale agreement. Typically then, buyers enter into a conditional due diligence period where the operations and financials of the business are scrutinized. In this scenario, the business buyer can walk away from the deal at any time. Sellers are usually quite disappointed if this happens since they put so much time and effort into the deal and now they must start again at square one and start the process over to find a new buyer.

Deal Must Be “Win Win”. In a business sale, the dynamic between the buyers and the sellers must be such that both parties to the transaction feel comfortable with the terms. Unlike some real estate transactions, a business sale must not be confrontational in order to successfully come to a close. The process in a business transaction, especially small business sales, can be quite emotional. The buyer must feel good about the seller and vice versa. The process is much too long and there are too many “outs” along the way for both parties that if a confrontational or aggressive negotiating stance is taken that the deal process could potentially fall apart. The role of the business broker is to ‘reign in’ the emotions of both sides. Be prepared for frank discussions with a business brokerage professional if negotiations (or emotions) get heated.

Selling a small business with a business broker is a good decision that should increase your chances of selling significantly.

Tips to Successfully Sell a Small Business

When you started your business you planned to grow it as a lifetime enterprise. Now, for whatever reason you have decided to sell your business and cash in on all your hard work. Maybe you want to stock up all over again in another field of business or maybe you just want to put up your feet and relax. Since selling a business is normally a once in a lifetime venture, it is unlikely that you would have any prior experience unless you have started or sold several small businesses in the past. Here is some good advice to get you started with selling your small business:

Defining your business sell expectations
In order to conclude a successful sale of your small business you need to plan the sale meticulously and the first step is to define your expectations:

  • Do you want to sell your business for cash or will you accept payment in another form such as stock or debt instruments?
  • What is your price expectation
  • What expectations do you have of the buyer in terms of business continuity and tradition?
  • Do you want to sell out to the public in an IPO or to your employees in a ESOPs scheme?

Timing and financing
It can sometimes take a long time to negotiate and conclude a sale of a business especially if there is complicated tax issues involved. The majority of small business sales involve some form of seller financing such as deferred payments so that you may not see a large lump sum of cash payment up front. Give some thought to the risk and how you would like to structure the small business seller financing.

Valuing the sell of your small business
You would need a detailed and sensible valuation of your business in order to justify the price that you will be asking for it. Decide on the method that you’ll use since methods may vary with the kind of business involved. The judgment on whether you will use asset value, replacement cost, or capitalization of earning or some combination thereof depends largely on your judgment and what a potential buyer will accept.

Re-doing your small business financial statements
As long as you are running your business, how you present your financial situation is largely dictated by tax considerations so as to minimize your tax bill. You will probably need to recast your accounts to show the true earning potential to backup any business valuation that you undertake. Though you should probably be cautious as to whom you show these records and consult an attorney in the process.

Sell small a business with privacy
It’s a good idea to sell your business with concerns for privacy. You should conduct all your sale negotiations in secret and restrict people in the know to as few information as possible. If word gets out that you are selling, you will find key employees leaving the company or being recruited by competitors, you’ll also find suppliers pulling lines of credit. This will simply impair your ability to get a decent price for your small business. The sale of a business usually screams financial troubles, you don’t want the wrong perception to get out in the public about your small business.

Use a competent small business broker
If possible use a competent business broker. Get referrals, shop around, and research. S/he will help you set a realistic price, identify and approach potential buyers in the strictest of confidence. Remember that s/he has a vested interest in getting the highest possible price since their rate for services rely on commissions of the sale.

Selling a business can take time, but due diligence will prove to breed success. One can expect a sale of their business if they’ve took the needed measures to ensure that their small business is aligned in a direction of growth and they are able to prove such statistics.

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