Business brokers, also known as business transfer agents, are individuals that assist buyers and sellers of private businesses in the buying and selling process. A business broker is similar to a real estate broker in that they try to put buyers and sellers together. They typically estimate the value of the business; advertise it for sale with or without disclosing its identity; handle the initial potential buyer interviews, discussions, and negotiations with prospective buyers; facilitate the progress of the due diligence investigation and generally assist with the business sale. In time past, the broker usually represented the seller, but today, buyer representation is becoming more common. Meaning, for the duration of the entire sale process, he serves as an agent of the buyer.
They aid the negotiation process and the eventual sale or purchase of the business in place. The representation of one party in a transaction usually creates a fiduciary duty between the broker and the party represented. As a result of the technicality of their duties, business brokers are required to possess certain educational and professional qualifications. Some of such are: The Accredited Business Intermediary (ABI) credential awarded by The American Business Broker Association awards and the Certified Business Intermediary (CBI) designation that is awarded by the International Business Brokers Association. Many times, companies and individuals may choose to go into these transactions themselves. While this is not necessarily a bad choice, here are a few reasons why you need business brokers to sell your company now.
Business valuation is the process or act of determining the actual value of a business. In any proposed business transaction that involves sales and negotiation, a proper business valuation is the first and most important step. You would need to know how much the business is worth first to ensure that you do not price too high or too low. There are various techniques and methods used to value a business. Some of such include: Discounted cash flow (DCF) analysis, Comparable transactions method, Multiples method and a Market valuation method.
In order to do this accurately, using the right method(s), you need to employ the services of business brokers. A good business broker should be familiar with the different approaches and able to advise you which is the most workable and realistic approach for valuing your type of business. After valuing the proposed business with whatever method he deems fit, the broker would be able to tell you when the price set is too high or too low.
Marketing the business
Asides from the fact that they can provide you with listings and information on businesses that are available for sale that you would not discover on your own, they can help you market your own business. Without the assistance of business brokers, finding buyers for your business may be difficult. Even when you find people who are interested in buying the business, they may not be equipped with the amount of capital required as well as the ability to manage the company.
When selling your business, you don’t want just any buyer, you want the best buyer. A business broker can help present your company in the best light to maximize the sales price. Business brokers have the required understanding of key values that buyers are looking for. As such, they can assist in identifying changes that would lead you to getting a better selling price.
Adequate Knowledge and Experience
As mentioned earlier, business brokers are usually equipped with the vital educational and professional knowledge to meet the needs of your sales transaction. Training specific to business brokerage would have adequately been obtained from several professional associations or other organizations. As such, you would be placing your company in good hands.
The other vital reason is the experience of the broker. Good business brokers, have proper sales experience, good knowledge of the current marketplace, market-related advice on the value of your business and many more. While choosing a business broker, it is important to pick those who have ample experience is making sales or purchases in your particular industry. Go with a broker who works in all industries and you likely will have a mediocre experience. An experienced business broker can level the playing field for a business owner because of his vast knowledge and experience portfolio.
This is one very important part of the entire business deal that has to be handled with utmost care and precision. Negotiation is a dialogue between two or more people or parties intended to reach a beneficial outcome. A negotiated sale is a process that includes only a limited number of potential buyers, and usually includes one interested party with a high probability to close the transaction. Negotiations might take place over a series of meetings, conversations and phone calls, or can begin and end within minutes. The goal for you, is closing the deal having made the best possible choice.
Where the negotiation goes awry, the entire actions taken before and after can be useless. For example, if doing the negotiation process, you take up the contract at a price that is unfavourable to you, then you are ultimately at a loss. For one, business brokers are not emotionally involved in the business, they are better placed to view the process of negotiation objectively.
Apart from the prime services that business brokers offer as stated above, there are tons of other services that they provide. Here is a rundown of some of them:
- They ensure confidentiality agreements for either parties
- They facilitate meetings between the seller and potential buyers
- Writing offers to purchase the business
- Pre-screening businesses for you
- They facilitating the due diligence investigations
- They use your interest as a guide to potential investments
- Assist the buyer in obtaining business acquisition financing
- Assist in the paperwork
- Scheduling and facilitating the closing of the transaction
Finally, ensure you select only the best business brokers. Check their levels of experience, see if they have been sued before, and have an idea of the kind of deals they have successfully closed.