Business For Sale & Franchise Search Engine  
   
My Account
Search Businesses For Sale
Location:

Category:

to refine your search results use advanced search  
Franchise Opportunities

Sell Your Business, Starting at $20.99 per month
Small Business Resources > Selling Your Business - Why Use a Business Broker

Selling Your Business - Why Use a Business Broker

Perhaps the most important business transaction you will ever pursue is the sale of your business. Many business owners attempt to do it themselves and when asked if they got a good deal, many respond with "I think so," or "I got my asking price," or "I really don’t know," or "It was a disaster." Often times these very capable business people approach the sale of their business with less formality than in the sale of a home. The purpose of this article is to answer the questions – Why would I use a business broker and what am I getting for the fees I will pay?

1. Confidentiality. If an owner tries to sell his own business, that process alone reveals to the world that his business is for sale. Employees, customers, suppliers, and bankers all get nervous and competitors get predatory. The business broker protects the identity of the company he represents for sale with a process designed to contact only owner approved buyers with a blind profile – a document describing the company without revealing its identity. In order for the buyer to gain access to any sensitive information he must sign a confidentiality agreement. That generally eliminates the tire kickers and deters behaviors detrimental to the seller’s business

2. Business Continuity. Selling a business is a full time job. The business owner is already performing multiple functions instrumental to the success of his business. By taking on the load of selling his business, many of those essential functions will get less attention, sometimes causing irreparable damage to the business. The owner must maintain focus on running his business at its full potential while it is being sold.

3. Time to Close. Since the business broker’s function is to sell the business, he has a much better chance of closing a transaction faster than the owner. The faster the sale, the lower the risk of business erosion, customer defection, employee problems and predatory competition.

4. Large Universe of Buyers. Business brokers subscribe to databases of businesses that enable them to screen for buyers that are in a certain SIC Code and have revenues that would support the potential acquisition. In addition they maintain databases of high net worth individual buyers and have access to private equity groups databases that outline their buying criteria.

5. Marketing. A business broker can help present the business in its best light to maximize selling price. He understands how to recast financials to recognize the EBITDA potential post acquisition. Higher EBITDA = higher selling price. He understands the key value drivers for buyers and can help the owner identify changes that translate into enhanced selling price.

6. Valuation Knowledge. The value of a business is far more difficult to ascertain than the value of a house. Every business is unique and has hundreds of variables that effect value. Business brokers have access to business transaction databases, but those should be used as guidelines or reference points. The best way for a business owner to truly feel comfortable that he got the best deal is to have several financially viable parties bidding for his business. An industry database may indicate the value of your business based on certain valuation multiples, but the market provides the real answer. An industry database, for example, can not put a value to a particular buyer on a key customer relationship or a proprietary technology. Most business owners that act as their own business broker get only one buyer involved – either another business that approaches him with an unsolicited offer or a referral from his banker, accountant, or outside attorney. Just look at the additional billion plus dollars of value created for MCI shareholders because of the competitive bidding between Verizon and Quest Communications.

7. Balance of Experience. Most corporate buyers have acquired multiple businesses while sellers usually have only one sale. In one situation we represented a first-time seller being pursued by a buyer with 26 previous acquisitions. Buyers want the lowest price and the most favorable terms. The inexperienced seller will be negotiating in the dark. To every term and condition in the buyer’s favor the buyer will respond with, "that is standard practice" or "that is the market" or "this is how we did it in ten other deals." By engaging a business broker the seller has an advocate with a similar experience base to help preserve the seller’s transaction value and structure.

8. Maximize the Value of Seller’s Outside Professionals. Business brokers can save the seller significantly on professional hourly fees by managing several important functions leading up to contract. His compensation is usually comprised of a reasonable monthly fee plus a success fee that is a percentage of the transaction value. The business broker and seller negotiate with the buyer the business terms of the transaction (sale price, down payment, seller financing, etc.) prior to turning the purchase agreement over to outside counsel for legal review. In the absence of the business broker that sometimes-exhaustive negotiation process would default to the outside attorney. It is not his area of expertise and could result in significant hourly fees.

9. Maintain Buyer – Seller Relationship. The sale of a business is an emotional process and can become contentious. The business broker acts as a buffer between the buyer and seller. This not only improves the likelihood of the transaction closing, but helps preserve a healthy buyer – seller relationship post closing. Often buyers want sellers to have a portion of their transaction value contingent on the successful performance of the company post closing. Buyer and seller need to be on the same team after closing.

Our experiences with businesses that engaged our firm as a result of an unsolicited offer from a buyer have been quite instructive. The eventual selling price averaged over 20% higher than the first offer. In no case was the business sold at the initial price. To conclude, the business broker helps reduce the risk of business erosion with improved confidentiality while allowing the owner to focus on running the business. The business broker led sale helps maximize sales proceeds by involving a large universe of buyers in a competitive bidding process. Finally, the business broker can improve the likelihood that the sale closes by buffering buyer – seller negotiations and by balancing the experience scales.

About the Author
About the Author
Dave Kauppi is a Merger and Acquisition Advisor and President of MidMarket Capital, representing owners in the sale of privately held businesses. We provide Wall Street style investment banking services to lower mid market companies at a size appropriate fee structure.











Related Resources
Selling a Business
12 Laws of the Business Buying and Selling Jungle - PART I
12 Laws of the Business Buying and Selling Jungle - PART II
3 Reasons To Sell Your Business Now For Maximum Profit
8 Key Steps to Selling Your Business
A Simple Formula For Increasing The Value Of Your Business
Are Business Brokers Licensed?
Auto Franchises
Build Business Value – Before Selling A Business
Business Brokers
Business Lawyer
Businesses for Sale by Owner
C-Corp Asset vs Stock Sale Dilemma
Capital Gains Deferral in a Business Sale
Closing The Deal
Coffee Franchises
Due Diligence - Not As Scary As It Sounds
Financing The Deal
Food Franchises
Franchise Information
Franchise Reviews
Free Small Business Magazines
Great Reasons to Sell Your Business and How to Do It Right
House Cleaning Franchises
How Much is My Business Worth?
How Not to Sell Your Business
How to Sell a Business Online
How to Sell a Small Business
How to Sell Your Business
How To Value A Business
Hurricanes Affect the Value of Florida Businesses
Important Tips When Selling a Business
Preparing a Business for Sale
Protect The Merger Or Sale Value Of Your Business: What You Can Learn From The DaimlerChrysler Deba
Role of Business Brokers in Selling a Business
Run Your Business Like You Have To Sell It
Sell a Business
Sell a Franchise
Sell My Family Business - Deciding to Sell the Family Business
Selling A Business - The Eleventh Hour Contract Change
Selling a Retail Business – How to Sell a Retail Business
Selling a Troubled Business
Selling Your Business - A Tool To Reduce Capital Gains Taxes
Selling Your Business - Prepare for the Buyer Visit
Selling Your Business - Should It Be a Do It Yourself Job?
Selling Your Business - Ten Steps to Increase Selling Price
Selling Your Business - Tips to Selling Your Business
Selling Your Business - What Would Sam Zell Do?
Selling Your Business - Why Use a Business Broker
Selling Your Technology Company - Why Earn Outs Make Sense Today
Should I Use a Business Broker to Sell My Business?
Should I Use a Business Broker to Sell My Business?
Small Business Debt Relief
Tax Tips on a C Corp Asset Sale
The Many Different Deal Structures When Selling a Business
The Pricing Dynamics of Selling a Business
The Ten Commandments of Selling My Business
To Sell a Business or Not Sell a Business A Crossroads Decision
What is a Business Broker?
What is a Covenant Not to Compete?
What is a Letter of Intent?
What is an E-2 Visa?
What is Cash Flow?
What is Due Diligence?
What is EBITDA?
What is FF&E? - Furniture Fixtures and Equipment
What Is My Business Worth? Learn How Small Businesses Are Priced
What is Seller's Discretionary Cash Flow?
When is the Right Time to Sell My Business?


©2017 BusinessMart.com.
Broker Membership | Terms Of Use | Financial Disclaimer | Privacy Policy | Cookie Policy | Resources | Franchise Opportunities | Website Traffic Ranking | Sitemap | Careers | Contact Us