Selling a business can be a time-consuming process packed with many challenges and obstacles. It doesn’t have to be that way. When it’s time to finally sell your business, a seasoned business broker can facilitate the process by understanding the many pitfalls inherent in business transactions, working in the best interest of both the buyer and the seller and maintaining the confidentiality throughout this entire process. Using a business broker can also actually increase the cash that remains in a seller’s pocket following the sale!
You may think to yourself that I can sell my own business and avoid paying a commission to the business broker. The short term reality of the payment of a commission is overshadowed by the benefits of having a seasoned veteran of business sales working with you. In order to understand the benefits of hiring a business broker, you need to first understand the Business Brokerage process and the role that an expert business broker plays.
Confidentiality - unlike Residential real estate, where you want everyone to know your house is for sale to accomplish the greatest exposure, as an owner of a business, you rarely would want any of your clients, suppliers, employees or competitors know that your business is for sale. Therefore, a business sale MUST be conducted in the strictest confidence to protect the ongoing viability of the business. If word gets out that a business is for sale, employees may quit, suppliers may want to change their terms, competitors pounce and the entire future of the business could be in jeopardy. Finding a seasoned broker that understands this and can deliver the best qualified buyer at the highest price while keeping the sale confidential is who you want on your team.
Accurate EVALUATION - Unlike Residential agents that deal in number of bathrooms and bedroom, the square footage and the neighborhood, Business Brokers deal in Annual Gross Sales, Cost of Goods Sold, Earnings Before Interest, Taxes, Depreciation and Amortization, Income Statements, Balance sheets, Inventory, Good will, etc. Finding a business broker that understands the financials and can review the books and recast the figures to come up with a true cash flow and using those numbers to provide an accurate evaluation and a price for your business is who you want on your team.
Qualified BUYERS - Once you decide to sell your business, you will soon realize that many calls you will get are more from people that are curious to know about your business than buy it. Screening every call to determine their financial qualification and background can be a gruesome task. This process can certainly take tremendous amount of time that may interfere with the seller to do what he does best-run the business. It is imperative, that sellers understand that only a small percentage of the people who inquire about a business eventually purchase a business. Finding a business broker that will work with each potential buyer and qualifies each prospect and only brings forward buyers that are genuinely interested in your business as well as financially capable of making the purchase is who you want on your team.
Negotiating and Navigating the Sale - Once you have a motivated seller and a qualified buyer, it’s time to negotiate the price, Terms and conditions, Financing, contingencies, closing date, training, covenant not to compete, lease negotiations, etc. Finding a business broker that has plenty of experience to navigate through all of these steps in a timely and efficient manner and ensuring the best interest of both the buyer and the seller at all times is who you want on your team.
About The Author: Ash Rasaei of Prudens Business Advisors assists business buyers and sellers in the sales and acquisitions of businesses in the 100K to 20M range in Los Angeles, Orange & San Diego County. Ash can be reached by phone at 310-622-8777.