4 Things New Owners Face After Buying an Operating Business
Purchasing an operating business has its advantages. You have an existing customer base, existing employees, and likely existing inventory as well.
However, as experienced business brokers can tell you, purchasing an operating business comes with its challenges, too. Here’s a look at some of the difficulties you may face right after buying an established company.
1. Assessing Current Employees
Sometimes, purchasing a business with an existing team of employees can be advantageous. They already understand how the business works and can perform daily duties, which means you don’t have to invest time and money into recruitment and training.
However, it’s essential that you evaluate the current team to determine whether the existing employees are good for the business. If your team includes unmotivated employees or those who seem to go against the grain of the culture you’re trying to create, you may be better off dismissing them.
Evaluating the current team can also help you decide whether you need to hire more people to support growing operations. In some cases, you may also determine that you need to downsize.
2. Evaluating Efficiency
Even the most successful businesses can stand to become more efficient. One of the best things you can do right after buying an existing business is to conduct a thorough efficiency audit. The sooner you can start optimizing, the sooner you’re likely to see reduced expenditures and increased profits.
You also may want to track efficiency and growth moving forward. You can often accomplish this by looking at financial records or by periodically using a business valuation calculator to see whether your company’s total value has gone up.
3. Evaluating (and Maybe Overhauling) Technology
Some established businesses may not have updated the technology they’ve used in years. More often than not, updating technology can save you time and money. For example, a lot of newer tech allows you to automate payroll, customer notifications, and other functions.
Of course, incorporating new technology might come with an upfront cost. You can end up paying more in terms of both the money it costs to purchase the tech and the time it takes to train your employees to use it.
4. Evaluating Business Relationships
In addition to other aspects of the existing business, you must also evaluate your relationships with vendors, suppliers, and other companies you may do business with. It’s particularly important to look at competitors to ensure you’re getting quality products for the best price.
Keeping the same partnerships might seem easier. However, if you can find a better deal elsewhere, it’s worth the effort to make a transition.
Buying an Operating Business Can Be Challenging — but Worth It
When you buy an existing business, you have the opportunity to assess it and optimize it accordingly. However, implementing the necessary changes is often more complex than it sounds. The good news is that when you work with experienced business brokers, they can advise you on how to best move forward once the deal is finalized.
Business Brokers Let You Focus on Operations, Not Sales Negotiations
Whether you’re preparing to move on to your next business venture or getting ready to retire altogether, selling your business can be exciting. However, it takes more time, work, and business savvy to negotiate a sale than most people realize.
Business brokers specialize in finding qualified buyers and making sure you get every penny your company is worth. But that’s far from the only benefit they can offer you. Here are several reasons why you can benefit from working with a business broker.
Negotiations Involve More Than You Think
Negotiating a sale price for a business isn’t like haggling over the price of a set of dishes at a yard sale. Typically, negotiations take time and involve several steps, including the following:
Assembling financial information
Having the business appraised
Agreeing on contingencies (like buyer financing or transfer of office lease)
Deciding whether the buyer wishes to keep the same staff on board
Determining “covenants and promises” (like non-compete agreements)
Planning transitions (like vendor contracts or ongoing projects)
If you have experience selling businesses, it may be possible to do so yourself. However, if you’re unfamiliar with the process, the buyer’s business broker may be able to take advantage of you. Business brokers handle sales on a daily basis, and they have the skills needed to build a deal that’s favorable to you.
Successful negotiations start before you even make contact with a buyer. Business brokers are uniquely equipped to appraise your business, assess the market, and decide on a reasonable asking price.
A business valuation calculator can help you get a general idea of what your business is worth. However, for more precise valuations, you must rely on the expertise that brokers can offer.
When You Broker Handles Negotiations, You Have More Time for Your Business
Going through negotiations can be incredibly time-consuming. And if you’re involved in your company’s daily operations, that means you’ll have far less time to attend to your duties. When you’re trying to attract buyers, the last thing you need is a sudden dip in performance or revenue.
Many buyers also ask business owners to make what’s called a “business as usual” promise while the sale is being finalized. That means the current owner must continue offering the same services, inventory, hours, etc. If you’re handling all negotiations, keeping the company functioning normally might be a real challenge.
If maintaining the business during negotiations proves to be difficult enough, the sale itself may be in jeopardy. If this buyer backs out, you’ll have to repeat the entire process again with a new one.
The Right Business Broker Makes All the Difference
A business broker can help you maximize your profits while still giving you enough time to focus on operations. Of course, you should carefully evaluate any business brokers you consider.
It’s particularly important to make sure they have experience with companies in your industry. When you take the time to select the right broker, you’re making an investment in the success of your future sale.
Business Brokers Connect Business Owners to Qualified Buyers
When you’re ready to head for the exit of your business, finding the right buyer to ensure a smooth transition is no small matter. Fortunately, business brokers can connect you to qualified buyers both confidentially and efficiently.
The professionals at Sunbelt Business Brokers have extensive experience and knowledge in selling and buying small and medium businesses. They can connect you with potential buyers to move your sale forward while maintaining your privacy — and allowing you to continue to operate your business.
Here’s how business brokers connect you to qualified buyers.
What Is a Qualified Buyer?
A qualified buyer possesses the traits necessary to successfully complete the transaction, including:
Industry knowledge
Business experience
Financial capability
Strategic vision
Cultural fit
This buyer may be an individual, investor, or business. In any case, a potential buyer with the financial resources to meet the asking price is important. However, to qualify as potential buyers, the individuals or entities should be able to show similar businesses they have purchased and deep knowledge of your industry.
Essentially, a qualified buyer is someone business brokers judge from experience as most likely to maximize your business and continue your company.
The Difference a Business Broker Makes
You can post a for-sale sign in the window or online and attract plenty of calls and emails. But most of the attention will likely be from curiosity seekers, your competitors, or buyers who lack the means to carry out the deal.
Business brokers, on the other hand, maintain a broad network of buyers. By taking the time to understand you and your business, they can tap their network to find potential buyers that match the financial requirements for the sale and your values and goals.
How Business Brokers Find Qualified Buyers
The road to connecting qualified buyers to sellers begins long before the date you mark on the calendar for walking out the door. Business brokers spend years building their network of buyers, investors, and professionals they can contact about your business. Bringing business brokers on board early can give them key insight into what kind of buyer would best match your company.
Business brokers will create a confidential information memorandum (CIM) to market your business and maintain confidentiality. The CIM will contain details about your products or services, financials, customers, and other information buyers want to examine. However, it won’t list information that identifies your company.
Business brokers will conduct due diligence to present you only qualified buyers, reviewing a potential buyer’s ability to:
Meet the purchase price
Fund the transaction
Structure a deal
Cover integration costs
Business brokers work to avoid wasting your time to get a deal done. They review potential buyers’ financial records, business credit, and track record running or buying other businesses.
Sunbelt Business Brokers knows how to attract the buyers you want while protecting your confidentiality. You can get an early idea about the value of your business with Suncoast Business Brokers’ business valuation calculator.
The Value of Connecting With Qualified Buyers
As the business owner, you’ll decide on the buyer whose hands you feel comfortable leaving your business in. A business broker can find that buyer for you. Working with business brokers can go a long way in ensuring the seamless and successful sale of your company.
Top 5 Most Important Factors Affecting Business Valuation
You’re approaching the time to exit the business you built from the ground up. You’re considering selling, but one question has nagged you: “What is my business worth?”
You may feel like you don’t want anyone to know you don’t have a firm grasp on the value of your business. But you’re not alone. That’s often the first question business owners have when approaching business brokers about putting their company on the market.
The team of experienced professionals at Sunbelt Business Brokers works with small and medium businesses to quickly sell for maximum value at closing. You can get a quick idea about the value of your business with Sunbelt Business Brokers’ business valuation calculator.
Take a closer look at what key factors affect business valuation.
What Is Business Valuation?
Business valuation is an estimate — based on data — by a professional of what a buyer is willing to pay for your business. The estimate comes from analyzing such aspects of the company as assets, earnings, and market position.
To maximize the worth of your business, you need to start long before you’re ready to leave to make the improvements necessary to boost the data behind the valuation. Consider bringing onboard business brokers like Sunbelt Business Brokers, who can guide you in maximizing factors to sell your business at or above the price you want.
The Top 5 Factors Business Brokers Evaluate
How much your business is worth is supported by many factors. However, because they understand what buyers seek, business brokers tend to focus on these top five factors for business valuation.
1. Financial Performance
A buyer wants to see the financial performance of your business for the last three to five years. Additionally, a buyer wants to understand the direction your revenue and expenses are heading. Strong financials demonstrated through your profit and loss statement, balance sheet, and tax return can increase the value of your business.
2. Growth Potential
Looking back at the health of your company is important, but buyers also want an idea of where your company is heading. What are the revenue and profit projections for your business, and what supports those estimates? Your growth potential is the capacity and likelihood your company can expand, possibly into other markets.
3. Customer Base
The size of your customer base, the length of time they have been customers, and their behavior are considerations for a buyer. If you had just one significant customer, that’s a risk. However, more customers who are loyal and pay on time can reduce risk, increasing your company’s value.
4. Market Conditions
While what’s happening inside your company plays a big role in valuation, what’s going on outside impacts your company’s value, too. The market conditions you operate in can determine the value a buyer places on your business.
5. Reliance on the Owner
Buyers want to see a company that can continue without the owner. The more your business can operate without you, the higher your business valuation may be.
Bring on Business Brokers Early
The key to a business valuation for a sale is to bring on business brokers long before you plan to exit to get maximum value from your business. Working with Sunbelt Business Brokers can help you identify the state of these factors and others to raise the value of your business before going to market.
What Should I Look for in a Reputable Business Broker?
If you’re looking to sell your business, you can try to save money by going it alone. However, selling a company takes a different skill set than running one — and without guidance from someone adept at buying and selling businesses, you might find out that you’ve wasted your time and money.
Sunbelt Business Brokers maintains a broad network of business relationships and industry professionals who can connect you with the right buyer at the best price for your business. But how do you choose the right person? We’ll discuss what you should look for in a reputable business broker.
What Is a Business Broker?
A business broker is an intermediary between a buyer and seller who facilitates the transaction. They can manage the sale of your company from the marketing to the closing. Here are just a few responsibilities business brokers handle:
Valuing your business
Marketing your company
Maintaining your confidentiality
Screening and qualifying buyers
Structuring deals
Negotiating prices
Closing transactions
Reputable business brokers can make the process go smoothly — but some brokers can create stress and cost you time and money.
The typical business sale takes six months to a year, and your contract with a business broker will likely be exclusive. Your time will be well spent speaking to several business brokers and evaluating their experience before signing a contract.
You can start the process with the business valuation calculator from Sunbelt Business Brokers.
What to Look for in a Reputable Business Broker
Many business brokers have real estate licenses, especially in states that require them. However, not all states have this requirement, and there is no license specifically for business brokers.
Instead, you can ask whether the broker is a member of professional organizations like M&A Source or the International Business Brokers Association. You might also inquire about designations like Certified Business Intermediary or Merger & Acquisition Master Intermediary.
Licenses, affiliations, and certifications can be a good starting point for finding a business broker. Additionally, consider this list of qualities and character traits:
Good Reviews
Talk to people you trust — other business owners, friends, and family — to see if they recommend anyone. Review a broker’s web presence and read comments from clients about their experiences. Also, look for completed deals on the broker’s website and think about if they align with your goals.
Solid Sales Strategy and Confidentiality
Ask potential business brokers questions about their process, such as:
What the broker’s typical marketing plan is
How they locate, screen, and qualify buyers
How they plan to protect your confidentiality
Good brokers can outline their sales strategy, explain their advertising budget, and assure you about maintaining confidentiality.
Communication
You want a broker who is available to answer your questions and who responds quickly to calls and emails. Selling your business is a big event and can be complicated and emotional. A good broker will support and guide you through the process.
Dedication and Commitment
Find out whether your broker buys and sells businesses full-time or part-time. To help you get the most value for your business and meet your financial goals, you want someone who is fully committed.
Transparency
Reputable business brokers will give you quick and straight answers when asked about fees and commissions.
Choose the Business Broker Who Fits You
After searching for a qualified broker with the qualities you need, you ultimately want to select someone you trust. Take your time and pick the broker you feel most comfortable with and confident in.
Top-Rated Business Brokers Can Get Top Dollar for Your Company
No one knows your company like you do. But when it comes time to sell, handing the reins over to a business broker can help you get top dollar.
Whether you have already received an offer or have decided to put your business up for sale, an experienced broker at Sunbelt Business Brokers could get your company sold faster and at a higher price than going it alone.
Business brokers can help you negotiate the best possible price with the highest likelihood of closing. In fact, Inc.com states that using top-rated business brokers can help you haul in a price as much as 35% higher than any initial offer.
Get started by estimating how much your company is worth with the business valuation calculator from Sunbelt Business Brokers.
What Is a Business Broker?
A business broker is an intermediary who has experience in buying and selling companies. Top-rated business brokers can handle the sale or purchase of a business from beginning to end.
Your expertise is in your business, and you wear many hats. But business brokers bring to the table specialized knowledge about taxes and regulatory matters involved in the complex transaction that is selling a business.
Here are some of the many tasks performed by business brokers:
Business Valuation: Determining the fair market price
Marketing: Advertising your business to buyers and maintaining confidentiality
Finding Buyers: Qualifying the right buyers for your business
Negotiating: Leading discussions to reach an agreeable price
Handling Paperwork: Working with other professionals to prepare and file necessary documents
Closing: Guiding you and your buyer through finalizing the transaction
The industry does not require an official license. However, some business brokers choose to earn a real estate license, and some states require them to hold one.
Many business brokers seek memberships in professional organizations such as the International Business Brokers Association or M&A Source. Additionally, a broker may earn a designation as a Certified Business Intermediary or Merger & Acquisition Master Intermediary.
4 Questions to Ask a Business Broker
To find the right business broker for you, compile a list of potential brokers and ask these four questions:
What are your specific qualifications?
How do you drive business value?
What does your marketing material look like?
What services are covered under your fee?
A business broker who offers satisfactory answers to these questions will be in a strong position to sell your company for top dollar.
A Big Life Event
Selling your business may be one of the biggest events of your life. It might be the largest asset you ever sell. A business broker will manage the entire process from marketing to closing, allowing you to continue running your business as you wait for the sale.
With their focused knowledge and negotiating prowess, business brokers can negotiate a higher price for your business than you could on your own, even considering the fee or commission you will pay.
What Do Business Brokers Cost?
Business brokers may work on a flat fee or a commission. For deals less than $100,000, many business brokers charge a flat fee. For businesses sold between $100,000 to $1 million, the commission charged is typically 10% to 15%. A reduced commission may be charged for businesses over $1 million.
Business brokers will listen to your needs and guide you in selling your business the way you want.
How to Sell Your Company Quickly With Business Brokers
You likely have an exit plan to leave behind the business you built from the ground up. But life can throw curveballs, and you may find yourself in a situation where you need to sell your company fast. What can you do?
There are several strategies you can deploy to shed the business quickly. However, no matter which strategy you choose, the sale is likely to go faster and smoother if you hire business brokers.
Business brokers can get you a higher price for your business while smoothing the process. Take a closer look at how you can sell your company more quickly with the help of a skilled business broker.
Why Might a Business Need to Sell Quickly?
Many life changes can trigger your need to sell and leave your company. Business brokers have grouped some of the triggers by the fourth letter of the alphabet: divorce, declining sales, disaster, disinterest, and debt.
No matter your reason, the key to moving your company from for sale to sold is your financial records, and there are ways for you to get prepared and stay ready if you need to exit your business fast.
Gather Records and Get a Business Valuation
Whatever might drive your need to sell your company with speed, potential buyers will be attracted by earnings, and having the documents to demonstrate the value of your business will be a lynchpin to making the deal go.
Whether you have to sell now or you have plenty of time, get all your financial records and any business-related documents together, organize them, and create a worksheet listing every record and who has it.
As you prepare to sell, consider what factors are important to convey to buyers, including:
Your business’s market value
What drives your business’s value
Any risks associated with your business
You can get the process started by using the business valuation calculator from Sunbelt Business Brokers to get a preliminary estimate of your company’s value. Once you have gathered all of your documentation, you can work with your business brokers for a complete evaluation.
To help the sale of your company move quickly, you might list it slightly below its market value. Keep in mind that this could create two issues: you may attract buyers who aren’t serious, which could slow down the sales process, or serious buyers might wonder what is wrong with your business. Finding the right value to list your business at is vital.
Engage Business Brokers Before You Need to Sell
The Exit Planning Institute estimates up to 50% of company exits are involuntary, and as high as 70% of businesses fail to find a buyer or have a plan to exit successfully. This means that the best time to hire a business broker is years before you think you will need to sell your business. A business broker can help you find value in your business, which you won’t have time to do at the last minute. Operating your business as if you’re going to sell now can help you keep your financial and business records organized and position you to get the most value from your business if you ever need to exit quickly.
Why Is a Business Valuation Calculator Important to Business Brokers?
If you’re ready to leave your business behind and head off into the sunset or start a new venture, a business broker and business valuation calculator might be your first stop.
Business brokers can help match you with the right buyer for your business or find the right seller, if you’re a buyer. The business valuation calculator helps provide business brokers with preliminary information to know their starting point in a transaction.
Here is why a business valuation calculator, like the one from Sunbelt Business Brokers, is essential for business brokers.
What Is a Business Valuation?
A business valuation is an estimate of how much a business is worth. The valuation analyzes many business aspects, such as assets, earnings, and management. Business valuations are used for many reasons, including buying and selling a business, raising capital, reporting taxes, and settling ownership disputes.
There are two common methods for determining the value of a business: asset-based and market-based. With an asset valuation, all the assets of a business are valued individually and then combined. This method looks at the business as both continuing and liquidating, or selling, the assets to come up with a value.
On the other hand, the market-based method considers data on businesses that are similar and their location.
What Is a Business Valuation Calculator?
A business valuation calculator provides a preliminary estimate of a business’s value. It’s designed to give you an idea of whether your business is worth as much as you believe if you’re looking to sell or whether you can afford a business you might be eying to buy.
The Significance of a Business Valuation Calculator
As professionals who assist people in selling and buying businesses, business brokers may use varying basic metrics in their calculations. But regardless of which metrics they use, brokers find the business valuation calculator important for several reasons:
Getting Quick Estimates: Provides buyers and sellers a rough value in the early phases of a transaction
Establishing a Starting Point: Helps lay the groundwork for a full valuation of the business
Making Informed Decisions: Helps set realistic expectations for buyers and sellers
The business valuation calculator works to set the direction of a deal for business brokers and is a vital preliminary step to seeking a complete assessment of a business’s value.
Potential Inputs to Business Valuation Calculators
While business valuation calculators vary for business brokers, some of the inputs might include the reason for the valuation, the industry your business is in, the number of years being analyzed, and the type of financial information being considered.
The industry is important because calculators use multipliers based on the industry of a business. A construction company would have a different multiplier than a restaurant, for example.
Buying or Selling Starts With a Business Valuation Calculator
There are many ways to value a business, and business valuation calculators may have different inputs. No matter the metrics used, business valuation calculators are important tools for business brokers to help you begin your journey to buying or selling a business.
4 Important Pieces of Information a Business Broker Needs to Know
If you want to make selling your business as seamless — and profitable — as possible, your best bet is to work with a business broker. Working with a broker is a partnership, and if you want to get the most out of that working relationship, you should make sure your broker has all the information they need to execute a successful sale. Here are some of the most important things your broker needs to know.
1. Your Business’s Value
Business brokers are experts when it comes to getting business owners top dollar for their companies. To make sure you get as much as you can for your business, your broker will need to know the value of your company.
If you’ve ever used a business valuation calculator, you probably had to enter details from your profit and loss statements, your tax returns, or both. Calculators give you a general sense of your business’s value, but your broker will look closely at your business, take industry trends into account, and determine a more precise valuation. It might seem like an involved process, but an accurate valuation is an absolute must.
2. Your Business’s Existing Contracts
Most businesses don’t operate in a vacuum. Your business is connected to other companies — vendors, realty companies, subcontractors, and more. Before showing your business to would-be buyers, your broker needs to have documentation of contracts like these:
Lease agreements
Vendor contracts
Agreements with freelancers or contractors
Operating agreements
Equipment leases
Licensing agreements
Business brokers don’t simply need to know about these contracts. They need to have them in order and ready to show interested buyers. If someone wants to purchase your business but finds that your broker doesn’t have the necessary documentation in order, they’ll likely look elsewhere.
3. A Marketing Plan
Before the broker lists your business, make sure you agree on a marketing budget. Business brokers generally have networks of interested buyers, so they may not need to invest substantial funds into advertising. Talk to your broker to ensure they have a clear marketing plan. Are there multiple people in their existing network who may be interested? Will they be listing your business for sale? If so, where?
4. Your Communication Expectations
Good business brokers always respond promptly to potential buyers. But when it comes to communications between you and your broker, you should discuss expectations ahead of time to make sure you’re on the same page. Some sellers might want daily or weekly updates. Others might want to get a call anytime someone has shown interest in the business.
Whatever your communication preferences, it’s wise to have regular check-ins with your broker to ensure you’re in the loop.
Your Business Broker and You: A Partnership for Success
Selling any business is an involved process, but the right business broker can make it easier. When you maintain open communication with your broker and make sure they have all the information concerning your business — and your expectations for the process — you’ll be well on your way to a successful sale.
How Does a Business Broker Get a Better Price for My Business?
If you’re selling your business (or even just considering it), you might have heard people tell you to work with a business broker. You also might understandably hesitate — why hire someone and pay a commission when you could just sell your business yourself?
You may not realize that a good business broker can often get you a better price for your business. Even when you factor in the broker’s commission, you still end up with a larger profit than you would if you sold your business yourself.
How can a business broker convince a buyer to pay so much more? Here’s a closer look.
They Can Accurately Value Your Business
A business valuation calculator can give you a quick idea of what your business may be worth. However, when it comes to selling, you want your valuation to be as detailed and accurate as possible.
If you set the price too low, you could miss out on thousands. But if you set it too high, you’ll waste time marketing it before you realize you’ll need to drop the price.
Business brokers are experts at valuing businesses. They’re also attuned to market trends and know what features of a business may make it worth paying a premium for.
They Have Access to a Pool of Buyers
Business brokers will usually maintain a list of people who are actively looking to purchase businesses. More potential buyers generate more competition, and that puts you in a place to possibly receive offers above the asking price.
They’re Expert Negotiators
In virtually every case, selling a business involves negotiating the price, the terms and conditions of the sale, or both. If you aren’t experienced when it comes to negotiating the sale of a business, you might find this step hard to navigate. There’s also a very real possibility that you’ll lose money by agreeing to unreasonable terms.
When you work with a business broker, you’ll have an advocate during this critical process. Your business broker can handle negotiations for you while representing your best interests.
They Keep Everything Confidential
If you sell your business on your own, it’s nearly impossible to avoid the word getting out. If this happens, your employees may quit because they’re worried their jobs are in jeopardy. Your existing client base may be tempted to go elsewhere, and some of your trade secrets may be revealed.
Business brokers are experts at maintaining confidentiality throughout the sales process. When you work with one, you can avoid arousing suspicion — and all the complications that come with it.
Should You Hire a Business Broker?
Choosing whether you should work with a business broker is just one of the many decisions you’ll make as a part of selling your business. It’s not a decision you should make lightly — it’s a choice that can dramatically affect your business’s final sale price.
Ultimately, unless you already have extensive experience selling businesses, working with a broker makes the process easier and is also likely to get you the greatest profit.
6 Types of Information Your Business Brokers Need From You
Want to sell your business? Do you feel like it’s time to hang it up and move on to something else? Whatever your reason for wanting to sell, a business broker should be at the top of your list of calls to make.
But before interviewing business brokers, you have homework to do: gathering and organizing everything a potential buyer will want to know about your business. Buyers want clear data that will convince them your business will be profitable after you’re gone.
So if you’re looking for a smooth sale at the highest price possible, you will want to prepare the right paperwork and packaging documents ahead of time. Here are six key types of information business brokers like Sunbelt Business Brokers need to set you up for success:
1. Organized Financial Statements
If you haven’t been good about record keeping, start with organizing your financial statements first. You may want to bring in a certified public accountant if necessary. It may save you time and add to the credibility of your financial documents.
You will need the following documents:
Tax Returns: For two to three years, five would be better
Profit and Loss Statements: For two to three years
Balance Sheet: A snapshot of the business’s assets and liabilities
Cash Flow Statement: A snapshot of how much cash you have on hand
A solid package showing your financials can signal to buyers that you’re serious about selling.
2. Your Reason for Selling
Are you ready to retire? Do you want to start another business? Do you think the market is hot for selling? Business brokers can direct their strategies and marketing according to your motivation for selling and your goal of when you want to sell.
3. What You Think Your Business Is Worth
The valuation of your business can be done in several ways. While your business brokers will handle this for you, having an initial estimate of how much you think your business is worth can give your business brokers an idea of your expectations. It can also help you gather the right documents to present to your business brokers.
You can start with Sunbelt Business Brokers’ free business valuation calculator.
4. The SWOT of Your Business
What are your company’s strengths, weaknesses, opportunities, and threats (SWOT)? Providing your business brokers with your evaluation of factors like the presence of loyal customers, environmental risks, innovation, and potential regulatory changes can go a long way in developing the right strategies for your business.
5. Operational Details of Your Business
The operational details of your business include:
The name and organizational structure
A customer list
A list of employees and their roles and responsibilities
Suppliers
Contracts
Licenses
Permits
Policies and procedures
Inventory
Equipment
Beyond the financial information, buyers will pay particular attention to how the company is run.
6. Other Notable Aspects of Your Business
You certainly want to place your company in the best light, but you also want to make a potential buyer aware of any issues that might create headwinds for the business.
Compile a record of any lawsuits that might impact your business, whether your company is involved or not. You also should provide records of any issues with employees or other human resources issues.
Setting Yourself Up to Win
Putting together these six types of information for your business brokers will show them you’re serious about selling your business. Together, you can set your company up to achieve the outcome you want.
What Kind of Businesses Do Business Brokers Work With?
The International Business Brokers Association notes that business intermediaries — business brokers, merger and acquisition advisors (M&A advisors), and investment bankers — tend to segment themselves by dollar amounts of value or revenue.
While many business brokers work with what are commonly referred to as “Main Street businesses” — those valued at less than $2 million — some, like Sunbelt Business Brokers, work with lower-to-middle market companies valued at more than $20 million.
Be that as it may, as you wonder whether business brokers would work to buy or sell your business, it’s better to focus more on the complexity of your business and the transaction as opposed to strictly considering the value of your business.
Selling or buying a business is a complex transaction no matter its size; what’s most important is having a professional business intermediary or team that can handle your deal from beginning to end, allowing you to stay focused on running your company. With that being said, read on to find out what kinds of businesses work with business brokers in order to be bought or sold.
Businesses Handled by Business Brokers
The experience, skills, and services of business brokers most often determine the businesses they work with.
Nevertheless, handling everything from valuations to negotiations and maintaining confidentiality to ensuring compliance with regulations means they often work with a wide swath of businesses, including (but certainly not limited to) the following:
Auto body shops
Hair salons
Restaurants
Pet stores
Construction companies
Tech companies
Printing shops
Cleaning businesses
Lawn care
Property management firms
For you, the key is finding the business brokers that fit for buying or selling your company; if you’re selling, consider starting your journey with the business valuation calculator provided by Sunbelt Business Brokers.
Small and Medium Businesses Bought and Sold
Among business intermediaries, business brokers handle transactions for small and medium businesses from initial consultation to closing, and they often help with valuation, marketing, vetting buyers, and negotiating and structuring deals, among many other tasks.
With that said, it’s clear that business brokers come from a range of backgrounds and wear a lot of different hats in bringing buyers and sellers together, so as you work to choose business brokers to handle a purchase or sale, ask the following questions:
How long have you been a business broker?
What is your success rate?
What accreditations do you have?
Are you a real estate agent?
What size businesses do you buy and sell?
That answer to that last question, in particular, will let you know the kind of companies your prospective business brokers normally work with, allowing you to ascertain whether they’d be a good fit for you right out of the gate.
Find the Right Business Intermediary for Your Business
When it comes to business intermediaries, there are no clear boundaries establishing the types of companies business brokers work with; some business brokers, like Sunbelt Business Brokers, have dedicated advisors who have bought and sold Main Street and lower-middle market businesses. Your business might be one of the businesses on the list above, or it might have revenue below $25 million. Either way, there are business brokers who will work with you, but you have to put in the work to find the ones who will work best for you.
Business Brokers Sell Your Business While You Focus on Operations
In most cases, a business broker is indispensable when you’re selling a company. That said, if you’ve never sold a business before, you might wonder what exactly it is that business brokers handle for you.
The truth is that selling a business is more complex than it looks, and by handling each step of the process, a business broker leaves you the time you need to focus on running your business. Here’s a look at what business brokers do for you behind the scenes.
They Give You a Precise Business Valuation
Business brokers are experts at what they do. They’re intimately familiar with businesses like yours and what they’re currently selling for, so they can create a business valuation that gets you maximum profit while remaining realistic.
They Find the Right Buyers
If you’ve never sold a business before, you might think it’s as simple as placing a listing and waiting for potential buyers to call. In reality, most business deals happen through networking. That’s something you could feasibly do yourself, but this kind of networking can be incredibly time-consuming — especially if you don’t already have promising business contacts.
Business brokers have pre-existing networks of buyers, and they also have the time to seek out new buyers if need be. That’s what they’re paid for! If you let a broker find your buyer, you’ll have more time to focus on the daily grind of running your business.
They Negotiate Deals
Once you find a buyer, you might think that the sales process is almost done. However, this is where it starts to get more complicated. Business brokers handle the back-and-forth between your business and the potential buyer.
Before closing, they generally negotiate a deal that ends up being mutually beneficial. Just like finding buyers, this is a time-intensive process that’s difficult to do when you’re also handling daily operations at your company.
They Keep Things Confidential
It might not seem like keeping a sale confidential has anything to do with running your business. However, if it becomes public knowledge that your company is for sale, that can adversely affect your business. Trying to handle problems that come from that public knowledge while managing the business and trying to sell it would be overwhelming for anyone!
Leave the Sales to the Experts
If you want to maximize your chances of getting a great sale price, you need to make sure your business continues to perform well while it’s on the market (and while you’re in the process of closing a deal). And if you’re the one in charge of running your business, it’s virtually impossible to handle every aspect of the sale yourself while also overseeing the business. Fortunately, there’s an easy solution. When you work with a business broker, you can outsource the marketing, interfacing with potential buyers, and negotiating to someone with experience. When you work together, you have a good chance of getting a fair price — or even better — for your business.
Is Your Business Suitable for Sale by Business Brokers?
Making the decision to sell your business is a big step. However, it’s the first in a line of many other major decisions. And in this case, the next decision is whether you should work with a business broker to find potential buyers and negotiate a fair deal structure.
Should you use business brokers to sell? Is your business one a broker would take on? Here’s a look at what factors to consider.
Is Your Business Successful?
Business brokers aren’t obligated to take on every single business they come across. There may be some who know buyers interested in buying and flipping failing businesses, but most people interested in buying a business want to make sure that it’s at least somewhat successful.
If you’re trying to sell a profitable business, there’s a good chance you can find a broker who will work with you.
Do You Have Experience Selling Businesses?
Business brokers essentially act as guides for business owners as they navigate the sales process. Unless you’ve sold businesses before, selling your business can be baffling and time-consuming. And if your buyer has a business broker, there’s a good chance you’ll get swindled. If you want the best possible price, it’s worth getting a broker.
Do You Have a Buyer in Mind?
When you work with a business broker, you’re not just paying for the broker — you’re paying for their network of eager buyers. In this situation, the broker’s fee is more than worth it, as you may not have even found a buyer otherwise.
However, if you already know who you’re selling the business to, you may not need a broker. A good example is if you’re passing your business down to your children. Because you don’t need a broker to find potential buyers and interface with them for you, it might not be necessary to hire one.
Are You Confident in Your Company’s Valuation?
It might seem like a small thing, but one of the most critical services business brokers offer is accurately determining your business’s value. Having a spot-on value is key before you start the sales process.
If you undervalue your business, you’ll potentially miss out on thousands of dollars you’d otherwise see. But if you overvalue it, potential buyers will turn away the second they see the price. Essentially, unless you have a highly accurate valuation already, hiring a business broker is a good idea.
Don’t Miss Out on the Benefits of a Business Broker
In most situations, business brokers can help you in your quest to sell your business at a profit. They can also help you ensure you don’t run afoul of tax laws when reporting the sale, and they can handle the time-consuming work of interfacing and negotiating with potential buyers.
Ultimately, the decision is up to you. Take a close look at your business, determine whether you know any potential buyers, and evaluate your own knowledge about selling a business. You might conclude that you’d benefit from the guidance of a business broker along the way.
Understanding Your Business Is Critical for Business Brokers
Are you selling your business? You likely already know that hiring a business broker can make the difference between a good sale and a great one. However, you shouldn’t hire just any business broker. If you want to get the best sale price possible, it’s imperative that business brokers understand your business. Here’s why.
They Can Get an Accurate Valuation
Easy online valuation calculators can give you a general idea of your business’s worth. But if you want to get a great sale price, you need a highly specific, accurate valuation.
Valuing a business is an art, and it takes a skilled business broker to do it. If a business broker doesn’t have a deep understanding of your business and how it works, it will be impossible for them to get the most accurate valuation possible.
They Can Grasp the Value of Intangibles
Profit margins and your balance sheet aren’t the only things that influence your business’s sale price and how a broker markets it. There are many so-called “intangible” factors that you can’t attach a monetary value to — but they still make a difference in the overall worth of your business. Here are some examples:
Customer loyalty
Brand recognition
Goodwill between your business and others
Copyrights or patents
Intangibles can lure in potential buyers, so business brokers should have a solid understanding of the intangibles of your business.
They Have a Feel for Which Buyers Might Be Interested
A good business broker makes it their mission to understand your business, and they take time to understand what buyers want. Selling a business isn’t like selling a car. Buyers usually don’t contact business brokers out of the blue in response to an ad. Instead, brokers maintain a network of interested buyers.
When they understand both your business and their potential buyers, they can nudge promising buyers toward your business and increase your chances of a fast, profitable sale.
They Can Be Unbiased
You know your business better than anyone. However, for business owners — and especially owner-operators — emotions often get in the way, at least to some extent. Even if you think you’re being perfectly objective, there’s a good chance that your emotions are influencing you on a subconscious level.
That’s a natural reaction when you’re selling something that has long been a major part of your life. However, to negotiate a deal effectively, you need someone with an objective view of your business. When a broker takes the time to understand your business and combines that understanding with objectivity, you’ll be well on your way to a successful sale.
Take the Time to Choose the Right Broker
Selling a business is a complex venture, and in virtually every case, it’s beneficial to have a broker. Don’t rush your selection process! Choosing a broker who’s willing to really get to know your business is essential, and it takes a skilled and motivated broker to do that well. With a quality broker by your side, you dramatically increase your chances of a deal that suits you.
6 Ways Business Brokers Can Save You Time and Net Higher Returns
If you’re fielding offers to buy your business or thinking about expanding by buying another business, consider hiring a business broker. Business brokers like Sunbelt Business Brokers can save you time and money by sorting through those offers or finding a business that fits your goals.
After all, you have a business to run. That business is the centerpiece of the deal and should be kept in peak shape to maximize its value and ensure that you have leverage in any transaction.
Business brokers have years of experience negotiating and executing the sales of various enterprises. They can handle your sale or purchase from beginning to end while guaranteeing that you comply with applicable state laws.
Here are half a dozen ways business brokers can save you time and net higher returns.
1. Making Connections
Business brokers have a vast array of business contacts and are intimately familiar with the environment businesses operate in. Having access to these buyers, investors, and others in your industry saves you valuable time and effort.Through the network of buyers and sellers many business brokers maintain, they can quickly find a buyer or seller that fits your objectives.
2. Advising You Before You Go to Market
The experience business brokers bring to the table also enables them to clarify your objectives and goals or even help you find improvements in your operations that could increase the value of your business, making you better prepared to sell or buy.
3. Valuing Businesses
Among other things, your broker will take stock of your company’s sales figures and competitors, what’s going on in the industry, and what’s important about your market. This ensures that you know exactly how much to ask for your business or pay for another.
4. Marketing Your Business
Making sure buyers and sellers know that you’re looking to buy or sell is essential to the work of business brokers. They know the industry and will create the marketing materials needed to show your business in the best light.
By publishing information about your company, business brokers generate interest among buyers and sellers, helping push the value of your business higher.
5. Maintaining Confidentiality
Through the many years business brokers have handled deals, they know how to keep your business information private. They’ll screen buyers, require non-disclosure agreements (NDAs), and negotiate with discretion. All of this helps protect your business information, your employees, and your customers.
6. Coordinating Logistics
Many professionals will be involved in bringing the transaction to its ultimate close. Business brokers know which professionals are needed — financial advisors, accountants, lenders, attorneys, real estate brokers, and others — and will ensure that all the necessary players are in place to properly complete the deal.
The Advantages of Working With a Broker
Whether you’re looking to retire, move on to another venture, or expand your professional dealings, you naturally want to get the most out of selling your business or buying another one. A business broker can save you time and help you get the highest return possible for your business while you handle the important work of running it.
12 Questions to Ask Your Business Brokers During the Initial Consultation
After years of long days and full weeks of building your business, you’re ready to sell your prized possession or buy another business, and you know you need a business broker. You’ve done some research online and created a shortlist. But you don’t know the best questions to ask to get the best business brokers for your company.
Selling or buying a business likely is the most important decision you will make. You have just one chance to get it right. Screening business brokers and finding the one that best fits your objectives and goals should be uppermost in your mind.
You should make a list of at least three business brokers. Most business brokers do not charge for the initial consultation, so you can sit down with more than one separately, ask the same questions, and compare answers.
Here are 12 questions to ask your business brokers during the initial consultation.
12 Questions to Ask Business Brokers
Your initial consultation with business brokers should solicit enough information to feel comfortable that you’ve found a broker or firm of brokers who will have your best interests at heart.
You will work closely with these business brokers for six months to a year, so you want to find someone you trust or believe will do the best job for you.
The following questions may not be all that you want to ask, but they can form a good foundation for finding the business brokers that will work for you:
How many years of experience do you have as a broker?
What types of deals have your business brokers worked on?
Have you worked to sell or buy businesses similar to mine?
What is your track record of successfully closing deals?
Do you have any testimonials or clients who can speak to your work?
Are you licensed to work in my jurisdiction?
How will you help me prepare my business for sale?
How will you value my business?
What is your process for finding potential buyers?
How will you help me negotiate the deal?
What is your process for closing the deal?
How much do you charge?
Business brokers should be able to easily answer these 12 questions to a level that helps you feel comfortable you’ve found the right ones. If not, move on to the next firm.
Your business is too important, and you’ve sacrificed too much to take a chance on business brokers you aren’t comfortable with.
Certification and Licensing
Like with some other professions, you might wonder about certifications and licensing. There is no national requirement to certify or license people to become business brokers.
However, the International Business Brokers Association recommends business brokers seek the group’s Certified Business Intermediary (CBI) designation to prove their expertise and professionalism.
In Florida, business brokers are required to obtain a real estate license to practice in the state.
Find Your Business Broker
Now that you know some questions to ask, you can create your list of business brokers. You can feel confident asking questions to reveal the right match to sell your business or locate a company to buy.
Business Brokers Can Expedite the Sale of your Commercial Business
You may be great at selling your goods or services, but selling your company requires a breadth and depth of skills only found with business brokers. If you’re looking to sell your commercial business and it needs to be done relatively quickly, a business broker is the professional to call.
Many commercial businesses take between four and twelve months to sell. The process — from deciding to sell to signing closing documents — involves dozens of factors and decisions. As a commercial business owner, you are focused on your customers and won’t have time to attend to the details of closing a commercial business sale quickly.
Here’s what business brokers can do for a commercial business owner:
Determine the value of the business
Prepare nondisclosure agreements
Market the sale
Screen potential buyers and schedule meetings
Assist with proposals, negotiations, and the structure of transactions
Professional brokers from Sunbelt Business Brokers are ready to take on these tasks, expediting the sale of your small or medium-sized business.
Getting Guidance From Experience
No one knows your commercial business better than you. But to sell your business — and fast — you need to know how the companies around you are faring, what your competitors are doing, and what kind of market there is for your goods and services.
Professional business brokers maintain a wide-ranging network of buyers, sellers, and other professionals. They can help you gather the information you need while they quickly get up to speed on your business, drawing on their skills and background in selling similar companies.
Business brokers are often called intermediaries because they are at the center of the sale. To succeed in this complex role, they must possess a wide range range of skills:
Business valuation
Business management
Corporate finance
Economics
Financial accounting
Industry knowledge
Law and licensing
Negotiation
Sales and marketing
This deep and wide experience helps set clear expectations from the outset, keeps the deal from running afoul of the law, and ensures there are no problems even after the closing. The value a good business broker brings to your deal will far outstrip what you pay.
Getting Maximum Value
Even though you want to sell your commercial business fast, there’s a long list of to-dos before that can happen. You must understand your assets and liabilities, have a firm grip on your financial statements, supply details on equipment, and compile files on customers, orders, contracts, insurance, and licenses.
With a business broker on board, you will not only cut down the time needed to gather and understand that information but will also have someone who can help you use it to establish the maximum value for your company.
Finding a Buyer
One of the greatest values business brokers will add to your deal is the list of potential buyers they maintain. Business brokers can help you value your company to seek the maximum price in the market, and they also can evaluate potential buyers, market your business, and negotiate for you — tasks that could take you months to complete on your own.
Through their experience and knowledge, business brokers offer the fastest path to selling your commercial business.
Do Business Brokers Charge a Commission or a Flat Fee?
Your business is humming along, and you’re thinking about selling it or buying another. Either way, you will need someone to help you find a buyer or seller and navigate state regulations, the valuation of your business, and tax implications. That person is a business broker.
While you know what business brokers can do for you, there’s one thing you might not have explored: Do business brokers charge a commission or a flat fee?
Most Business Brokers Charge a Commission
Instead of a flat fee, many business brokers work on commission, or a “success fee,” as it is known in the business broker world. It’s called this because you pay a percentage commission to the business broker only after the deal is successful. This fee structure is similar to working with a real estate agent, who gets paid at the closing of a sale.
The commission for business brokers is typically between 10% and 15%, depending on the price and size of the business. Generally, the smaller the sale or purchase, the higher the percentage commission; deals worth more than $1 million might see commissions slide toward the lower range of the scale.
Good business brokers should always work in your best interests, trying to get the most value they can for you. Working on commission can be an added incentive.
Some Business Brokers Charge a Flat Fee
Generally, a flat fee structure doesn’t give business brokers an incentive to increase the value of the transaction. But there are reasons business brokers might charge a flat fee.
Some business brokers charge a flat fee of $10,000 to $15,000 for sales and purchases of smaller businesses. These small businesses might generate around six figures in annual sales or less.
For businesses valued at less than $100,000, the flat fee might seem high, but the value of hiring a business broker — finding a buyer or seller, adding value to the business, and marketing the deal — might be worth it.
The opposite end of the spectrum is another time business brokers might charge a flat fee. Large, multimillion-dollar deals or transactions that take 12 months or longer might require a flat fee as a retainer.
Other Fees You Might Encounter
While typical commissions are around 10% to 15% and flat fees are often at least $15,000, there are no set prices for business brokers. You can negotiate the commission or flat fee.
One thing to keep in mind when researching business brokers is that you might be charged additional fees, even if you’re paying a commission. Business brokers handle a lot of tasks, and they might charge fees for some of those tasks in addition to their usual commission or flat fee. For example, a business broker might charge you additional fees related to legal work, accounting, and marketing. Whether you pay a commission or a flat fee, find out up front whether these additional fees or others are included in your payment agreement.
How Beneficial Are Business Brokers for Selling My Sole Proprietor Business
Building a business from the ground up as a sole proprietor can be incredibly challenging. But if you’ve done the work, you might decide that it’s time to sell and move on to your next business venture.
You likely already know that business brokers are essential when it comes to selling larger businesses. But what about sole proprietorships? Here’s a look at how business brokers can make a major difference in the sale process.
They Know How to Find Buyers
Business brokers maintain a network of buyers who are eager to purchase businesses. When it comes time to sell yours, your broker will connect you with enthusiastic potential buyers.
What if you already have a buyer in mind? You’ll still benefit from working with a broker because they help with more than just finding buyers.
They’re Expert Negotiators
Since you’ve worked so hard to build up your sole proprietorship, handling the negotiations yourself isn’t a great idea.
Negotiating a sale price for a business isn’t like haggling at a flea market. Business brokers sell businesses day in and day out, so they’re well-versed in the difficult art of negotiation. They’re also familiar with changing trends in your industry, so they will be able to tell you whether an offer is worth taking.
They Can Help You Minimize Tax Liability
Most business owners sell with the goal of getting as much profit from the sale as possible. However, the more profit a sale generates, the more you’ll owe in capital gains tax.
The way a sale is structured can make a dramatic difference in the amount of tax you owe, and business brokers can help you design a deal structure that keeps your tax liability as low as possible.
Tax code is difficult for most people to understand, and the fact that it’s constantly changing doesn’t make it any easier. Brokers keep track of changes in tax code and can use that knowledge to execute successful sales.
They Save You Time
If you’re going through the process of selling your business while you’re also running it, you may have already found that it’s a challenge to manage both. This is particularly true during the due diligence process, where the buyer can request many types of documentation:
Bank statements from the past 3 to 5 years
Tax returns from the past 3 to 5 years
Financial statements from the past 3 to 5 years
Any relevant leases or contracts
Insurance policies
Employee handbooks and official protocols
Business brokers can help you find and compile this information ahead of the due diligence process. You can trust them to handle the logistics of the sale so you can dedicate your time to your business.
Are Business Brokers Right for You?
Selling your sole proprietor business is a major event, and it’s something you need to plan with caution. When you work with a business broker, you have a professional on your side to take charge of finding a suitable buyer, getting a fair sale price, minimizing your tax liability, and ultimately, saving you time.