What are the benefits of using a business broker to sell your company?
The one deterrent of using a business broker is cost. Some business brokers charge upfront while others do not charge a penny until the business is sold. The cost varies greatly from region to region and firm to firm. A lot of brokers charge between 8-15% of the total sales price for their service.
Usually when a broker charges a lower percentage, there are upfront fees associated. In most cases, if you find the right business broker, we pay for ourselves. Over and over again, we’ve seen many business owners try to sell their business for the wrong valuation. A lot of times for less than what the business is actually worth. When corrected and the proper valuation is used, we typically cover our own commission and get our clients more money for their business.
Besides providing a proper business valuation, a business broker helps in many ways. A lot of owners do not realize there are many steps to a sale of a business. A business broker helps you get all the documentation together that is needed for the valuation and sale.
The first step is determining the valuation.
Once that is complete, listing the company and soliciting potential strategic acquirers would be next. This can be done through numerous websites and hard work. When a business owner lists their own company or approaches a strategic acquirer, potential buyers can figure out detailed business information before signing an NDA. If you wanted to keep it confidential, this can be a big problem especially if the buyer has your name, email, and other relative information.
Using a business broker will help keep your information confidential. Additionally, before any detailed information is released, a business broker can require a Non-Disclosure Agreement and a Buyer Qualification Form to be filled out.
This leads us to pre-qualifying potential buyers. When you list a business for the right valuation and use good marketing strategies, you will have a lot of inquiries. As a business owner operating a business, you may not have time to address all the emails, questions, and other requests you receive. Also, you may be disclosing proprietary information to individuals or competitors without knowing it.
So a good business broker will take the time to learn about your business. He will weed out the potential buyers who cannot afford your company or may not be qualified to run your company, and buyers who are kicking tires and are not willing to sign an NDA.
Once a qualified buyer is interested, business brokers can facilitate a meeting between the buyer and seller. It is very important to maintain a great relationship with a buyer who is buying your business. In almost every case, buyers require sellers to stay on for a training period, usually 30 days. It is important to make sure that the relationship is not sour since you will be more than likely working together for a short period of time.
Therefore, a business broker can work on your behalf and ask the hard questions. They can also negotiate the price and take a lot of the work off the business seller.
Typically, most buyers also have no experience buying a business. Having a business broker who has connections to lawyers, lenders, and other necessary individuals is very important. This helps buyers find necessary financing and proper offering documentation/agreements.
So in conclusion, the major benefits of using a business broker are:
- Get help determining the proper business valuation
- Get help gathering all the necessary documentation needed for selling the business
- Confidentially, but strategically list and market the business for sale
- Market on various sites using premium broker ads
- Actively find buyers including strategic acquirers
- Screen and qualify potential buyers
- Gather all potential documentation needed from a potential buyer