Why Use a Business Broker?
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If you’re a relatively small business, such as a dairy or café, then it may not be cost-effective to use a business broker, given that many have a minimum commission of $20,000 or so. This is because selling a small business can often involve just as much skill, time and attention as selling a larger business. If you are a smaller business then you may be better off selling yourself, via a website such as Trademe.
However, for larger businesses, then using a suitably experienced business broker is pretty much essential, if you want to get the best results with minimal stress.
- Prepare, Prepare, Prepare – If you’re considering selling your business, then don’t leave it until the last minute! While some brokers will happily list and advertise your business if you come to them requiring an urgent sale, this approach generally leads to a poor outcome. A professional broker, who is genuinely committed to the best outcome, will want to be involved at least 3-6 months prior to the sale process and often sooner, depending on the size of the business. A well-prepared business, supported by a professional marketing campaign, should sell much easier and at a higher price.
- Price Effectively – A professional business Broker can help you get the best price. They know the market and have specialist expertise and systems to help guide you on the likely sale price. If you price your business too high, most potential buyers will not even inquire about your business. If you price your business too low, you won’t get what your business is worth. And you will not get what you deserve. You have worked hard and deserve a great price. Many businesses fail to sell because they are overpriced.
- Time is Money – A good Business Broker will allow you to have more time for running your business and enjoying your private life. Besides running your business, you probably have plenty of other things to do. A competent business broker will understand the market, and should work with you, well in advance of marketing your business, to ensure that it is ‘market-ready’ and likely to achieve the best price. This requires considerable specialised knowledge and skills.
- When Confidentiality and Discretion is Important – If confidentiality is an issue when selling your business, then any marketing can be tailored to exclude any specific identifying information of your business – by providing a general description only. An experienced broker will screen inquiries to ensure that only those serious buyers, who are in a genuine position to buy, are provided detailed information about the business. They will obtain a signed Confidentiality Agreement (CA) before sharing the information about your business, or even disclosing the identity of the business. There can often be ‘tyre-kickers’ who will waste a lot of time if you let them. The broker will manage this for you.
- Negotiate the Sale Process – The broker will help handle and negotiate the technical aspects of the sale, including the often detailed and time-consuming process of due-diligence. Most buyers prefer to negotiate via a third-party, and the business broker can take the stress and the personal element out of the equation.
- Established Networks & Systems – Most brokers have a detailed database of prospective buyers, some who may be looking for a business like yours. They have access to resources and to professionals that know your industry. A good broker understands how to prepare your business, so that it is ‘market-ready’, and will develop a structured, cost-effective marketing campaign targeted at the most likely buyer segments, who are likely to pay the highest and best price.
An experienced business broker, supported by good systems, should cover the cost of their commission many times over. They will ideally start working with you sometime before marketing your business. They will identify the issues, important to buyers, that you should address before marketing the business. This will help to obtain the best sale price and terms.
- Professional Marketing – A good Business Broker will create a clear and effective Information Memorandum (IM) that outlines all the essential details of your business. A comprehensive, professional package can take a significant amount of time and expertise to prepare, but is a powerful tool to help sell your business.
- Supportive Financials – Many business financial statements, and tax returns, don’t show a significant bottom line. Some may even show a ‘paper loss’. Since many people buying a business have never been through the process before, they find this to be very confusing. Some will walk away, because it appears that the business is not profitable. A good business broker, working with you and/or your accountant, can communicate and clarify the quantitative elements of your business. This is often referred to as normalizing financial statements, and when explained well and clearly, helps prospective buyers understand the true financial profitability of your business.
- The Right Connections – An experienced business broker should have a database of possible buyer candidates, and can connect to off-market buyers. And if the broker is correctly engaged well in advance then they may be able to target potential buyers directly without having to publicly advertise the business.
- Great Tools & Systems – A good business broker will pay for, and have access to, a wide array of tools to help sell your business. Therefore, they will have access to forms, appraisal systems, great websites etc. Ask to see the list of tools and methods a business broker will use to sell your business.
- The Right Team – Some business brokers would rather sell the business themselves, and get full commission. But not every buyer gets to reach out to every business broker. A great business broker will have a network of fellow professionals and confidential business brokers, with their own network of prospective buyers. Work with a broker who is willing to cooperate with other professional brokers and professionals.
- Flexible Fees – The broker’s fee is usually paid when the business is sold. Generally, fees vary depending on the sale price of the business, but as a rule of thumb the larger your business, the more room for negotiating a fee structure. Because even selling a small business can require significant time and expertise many brokers have a minimum commission fee, regardless of the sale price. This rule out many smaller businesses. If you have been able to work with the broker to prepare your business for sale then it should be a natural part of the process to agree on a fee structure that works for both parties.
- Remember, selling a business is NOT like selling a house! – An effective, competent business broker should have considerable business experience. They may have owned their own business/es, or come from a senior management role. Many will be degree qualified. A good broker must have a sound understanding of business, including business systems, the financials, legal aspects, and value-drivers. They will be skilled at working with an array of professionals, preparing and interpreting business documents, and negotiating with potential buyers.
- A highly skilled broker is worth their weight in gold – They will work alongside you, using their knowledge, experience and systems, to prepare your business, so that it is more likely to sell for best possible price and terms. This makes your life easier, less stressful, and delivers the best outcome.
Want to learn about selling your business and how it rates on the Value Activator (VA) System™ then contact us now!
Why Use a Business Broker?
A professional business broker can be helpful in many ways. They can provide you with a selection of different and, in many cases, unique businesses, including many that you would not be able to find on your own. Approximately 90 percent of those who buy businesses end up with something completely different from the business that they first inquired about. Business brokers can offer you a wide variety of businesses to look at and consider.
Business brokers are also an excellent source of information about small business and the business buying process. They are familiar with the market and can advise you about trends, pricing and what is happening locally. Your business broker will handle all of the details of the business sale and will do everything possible to guide you in the right direction, including, if necessary, consulting other professionals who may be able to assist you.
Unlike a ‘traditional’ business broker primarily focused on ‘the sale’, Business Associates™ will begin working with you well in advance of marketing your business, to ensure that it is ‘Sale Ready’ and positioned to obtain the best possible price and terms. The traditional business broker will normally prepare a summary IM (Information Memorandum) to make available to potential purchasers. Inevitably the IM is normally “too little, too late” and adds little or no value to the likely sale price. Prospective purchasers may have lots of questions and if they are not answered in a timely and thorough manner, they often become disinterested and “go stale”. Also, there is nothing more frustrating and disruptive than a relatively ill-prepared broker coming back to you constantly for urgent information requests.
In contrast, Business Associates™ unique VA (Value Activator) System™ positions your business for maximum value – whenever you want to exit. We ideally begin working with you well in advance of marketing your business so that not only do we maximise the likely sale price but we also become intimately familiar with your business, and in a position to respond to most inquiries without having to bother the business owner every time.