What Will a Business Broker Do for You?
Business owners often use business brokers as an intermediary to help with the sale of a company. They will help you get the best price and deal structure for your business by maximizing its value, marketing to the right buyers, and negotiating the best terms. Brokers are useful for small business owners at any stage of the selling process because they help maintain client confidentiality and enable the owner to continue operating the business during the process of a sale.
Understanding how to utilize a broker is key to maximizing the value of your business sale. Read on to learn about how to leverage a broker throughout the entire process of selling your business, from initial preparation to listing to final sale.
Before Listing: How Brokers Assist in Business Valuation
Before listing a business for sale, owners should make their business as attractive as possible to potential buyers. A business broker can significantly reduce the burden on sellers by providing essential advice for maximizing value. Brokers typically help with three activities prior to listing a business for sale: exit planning consulting, financial organization, and a realistic valuation.
Exit Planning Consulting
Business brokers can help sellers prepare for the sale of the business by walking them through the entire sales process, revamping sales and marketing efforts (e.g., redesigning a website or renovating real estate), and helping sellers define what makes them unique in the marketplace. Brokers leverage years of experience to help business owners make their businesses more attractive to potential buyers by emphasizing their uniqueness, profitability, stability, or ability to disrupt existing marketplaces.
Financial Organization
Small business owners can utilize a business broker to put together the right financial documentation to showcase to potential buyers. This could include information about profitability, the number of customers, revenue growth, cash flow, etc. The broker ensures that all of this information is confidential and only available to qualified and interested buyers. They can also assist buyers in obtaining a Small Business Administration (SBA) loan, if necessary.
Realistic Valuation
Business brokers can assist sellers with a business valuation based on relevant comps and market trends. This unbiased valuation enables the broker to set an initial asking price and negotiate the best price for the seller with prospective buyers.
Listing a Business: How Brokers Attract Potential Buyers
After completing the initial preparation for business owners, brokers then market the company to potential buyers and act as intermediaries between business owners and business buyers. They also conduct due diligence on prospective buyers to ensure that owners only meet with qualified and interested buyers.
Marketing the Business
Brokers market your business and attract qualified buyers - even while keeping it confidential. They'll create a Confidential Information Memorandum (CIM), which includes details about the business’s products, financials, customers, real estate holdings, and other relevant information for prospective buyers. Business owners benefit from the brokers’ extensive network and prior experience with business sales to quickly connect parties interested in a business sale.
Most will use online platforms, such as BizBuySell, to connect sellers to prospective buyers. Brokers will ultimately conduct an advanced search to help small business owners find potential buyers.
Managing Due Diligence
Brokers conduct due diligence on prospective buyers to ensure that the buyer is truly interested and financially qualified to acquire the business from the seller. Brokers may look for signs that the seller is genuinely committed to the sale, such as ownership of a successful existing business that is similar to the business the buyer is trying to acquire.
Selling a Business: How Brokers Finalize a Successful Sale
After the business broker connects a business owner with a prospective buyer, the broker will manage the sales process and help the two parties complete a successful sale.
Negotiating and Setting Sales Terms
A successful sale requires the seller and buyer to agree on a sale price that the broker negotiates. The best business sale occurs when a broker can get a buyer to offer more than the initial asking price, maximizing value for the client.
Managing Buyer Financing
Brokers work with lenders to ensure that the buyer has the financial stability to take on loans from the Small Business Administration (SBA) or other forms of financing. They also help set the terms of financing, such as leasing, seller financing, franchise opportunities, and escrow.
Coordinating the Owner Exit
Once the terms of the sale are set, a business broker works with the seller to organize the transition. They’ll help the new owner acquire the company as smoothly as possible, including transitioning company leadership, setting an exit date, and organizing training for the new business owners.
Where to Find a Business Broker
To find the right buyer, you’ll need to find the right broker for your business. Typically, a broker works on commission, receiving about 10%-15% of the final sale price. However, for business sales that may take longer than 12 months, sellers may opt to put a broker on retainer.
Look for brokers that are members of industry or professional associations. And remember: If you’re looking to sell real estate alongside your business, the broker needs a real estate license, too.
(To read more about finding a qualified broker, see How to Choose the Right Business Broker.)
Some sellers partner with a broker they already know, especially if they have years of experience, while others may look for someone new. Visit BizBuySell’s business broker directory to find the right broker to suit your needs.