Great Benefits of Using Business Brokers to Sell Businesses
Whether you’re preparing to sell your first business or your upcoming sale is just the latest of many, selling a company is a time-intensive process that can quickly become overwhelming. However, when you work with a business broker, your broker can save you stress, effort, time, money, and more. Here’s a closer look at some of the key benefits of working with business brokers when making a sale.
1. They Might Already Have a Buyer in Mind
Depending on your industry and your business itself, finding buyers can be a challenge. One of the main draws of business brokers is that they maintain networks of active, interested buyers. This means that once your business goes on the market, your broker can quickly connect you to multiple potentially interested buyers.
2. They Keep Things Confidential
If your employees, clients, or customers learn that you’re selling your business, you might experience significant disruption. Your best employees might worry about losing their jobs and start applying elsewhere, and your customers might turn to competitors instead.
It can take significant time to sell a business, and if your company starts experiencing major issues before you find a buyer, a successful sale can become next to impossible.
However, when you have a business broker, you can avoid letting customers and competitors know you’ll be selling. Brokers can conceal identifying details of your business. Once your broker has verified that a potential buyer is qualified, they can ask the buyer to sign a non-disclosure agreement.
3. They Can Accurately Value Your Business
There’s a lot to consider when you’re preparing to sell a business — so much so that it’s easy to overlook the basics. A successful sale starts with an accurate valuation. Overvaluing your company means you’ll find few, if any, buyers. Undervaluing means you’ll potentially cheat yourself out of tens of thousands of dollars.
Business brokers value businesses on an almost daily basis. And because they’re uniquely attuned to market dynamics, they can help you price your business for a quick sale or advise you to sell later if you want to maximize profit.
4. They Can Handle the Logistics
Selling a business is far more complex than selling a vehicle — or even selling a home. From start to finish, the process is filled with logistical challenges:
Creating a marketing strategy
Communicating with interested buyers
Vetting buyers
Negotiating a deal structure that’s beneficial to both of you
Ensuring all necessary documents are appropriately filed
Addressing the tax implications of a sale
Even if you’ve sold companies before, tackling these challenges while continuing to run your company isn’t an easy feat. Business brokers can give you the peace of mind that comes with knowing that the sale — with all of its intricacies — is in good hands.
Is Working With a Business Broker the Right Choice for You?
Ultimately, whether you decide to work with business brokers or sell your business on your own is up to you. However, if you do choose to work with a broker, you’ll likely find that the sales process becomes smooth and efficient. And most importantly, you’ll have more time to focus on running your business.
Steps to Selling Your Business With a Professional Business Broker
Whether you’re looking to retire or you just want to move on to a new business venture, selling your company brings a tremendous sense of accomplishment. However, the logistics of selling that company can quickly become overwhelming.
As you may already have discovered, the challenges of selling a business are quite different from the challenges of running one. But when you work with business brokers, you can rest assured that the sale is in the hands of competent professionals — and that you’ll have the time to keep your company running smoothly right up until the sale.
Here’s an overview of how the sale process works.
Step 1: Choosing Your Broker
A successful sale starts with the right broker, so you should take your time when making a selection. Here are some tips to help you ensure you choose the right broker:
Make sure the broker has experience in your industry
Make sure they have experience selling businesses of a similar size to yours
Verify their licensing information
Ask them about their marketing plan
Ask for past client references
Take your time with this process. You should also make sure your broker is someone you feel comfortable talking to — communication skills are an essential part of what business brokers do!
Step 2: Business Valuation
Business brokers can take the time to evaluate your business and give you a highly accurate, fact-based business valuation. While you can get a general idea of your company’s value through online calculators and similar tools, a precise valuation is an essential part of the sales process.
Step 3: Finding Potential Buyers
While business brokers excel when it comes to marketing businesses, many do not need to publicly list a company to find a potential buyer. That’s because brokers maintain active networks of people interested in buying companies like yours. That means they can quickly assemble a short list of would-be buyers for your consideration.
Step 4: Choosing a Buyer
Your broker can handle communications with potential buyers, but ultimately, the choice of buyer is up to you. Your broker can discuss your available options and help you select your preferred buyer.
Step 5: Negotiation and Deal Structuring
This is an area where experienced business brokers can more than make up for their fees. Your broker can negotiate a price and various contingencies with buyers, and once you agree on the terms of the sale, the broker can draw up the necessary contracts.
Step 6: Post-Sale
A broker’s job doesn’t end when the sale is finalized. Selling a business often comes with significant tax implications, and your broker can help you navigate them.
Are Business Brokers the Right Solution for You?
While working with a business broker might not be the right choice for everyone, it makes the sales process simpler and leads to increased profits in the majority of cases. When you take the time to find an accomplished broker with experience in your industry, you’ll be well on your way to a stress-free, successful sale.
How Do Business Brokers Enhance Business Sale Success?
The sale of your business is arguably one of the most complex financial transactions you’ll ever negotiate. The process of getting a business valuation and setting your asking price is just the beginning; potential buyers will likely want to negotiate contingencies, financing, timeframes, and almost any other aspect of the sale you could imagine.
If you want to maximize your chances of negotiating a sale that’s favorable to you, working with business brokers is critically important. Here are a few key ways in which they can make a difference:
1. They Can Give You a More Accurate Valuation
Before you sell, you need to know your business’s true value. If you put it on the market without knowing its worth, you might shortchange yourself by thousands. Alternatively, on the opposite extreme, you may even go for months without any offers because you’ve accidentally overvalued the company.
An online business valuation calculator can give you a general idea, but business brokers excel when it comes to giving you precise numbers.
2. They Can Screen (and Connect With) Buyers
As brokers handle business deals for a living, they can quickly tell who’s serious about purchasing your business and who isn’t. Perhaps more importantly, though, is that they also know how to find interested buyers. Brokers usually maintain a network of people interested in purchasing specific businesses, which means they can often expedite the sales process.
3. They’ll Handle Negotiations for You
If you want your business sale to be as successful as possible, you need to be a savvy negotiator. There’s almost always some level of compromise on both sides during a sale, but if you don’t know exactly what you’re doing, it’s entirely possible to be taken advantage of.
Business brokers know what elements of the sale can be compromised on and which ones cannot. And because the amount they earn depends on the final sale price, you can be assured that they’ll be just as motivated as you to secure a high sales price.
4. They’ll Save You Time
Some business owners who opt to sell their companies themselves seriously underestimate the sheer investment of time and energy the process requires. If you’re an owner-operator, you might find that the many tasks associated with a sale, such as the ones below, make it difficult to focus on running your business:
Responding to inquiries
Screening potential buyers
Performing due diligence
Negotiating terms of the sale
Ensuring the sale complies with all applicable laws
If you start to have trouble balancing the sales practice with running your business, your business’s value may decrease, which can drive away potential buyers.
Is Working With a Business Broker Right for You?
Some business owners believe they can save money by negotiating the sale of a business themselves. However, unless you already have extensive experience in sales, a business broker’s fee will almost always pay for itself and then some. When you take the time to find a broker with a proven track record of selling businesses in your industry, you’ll be well on your way to a successful sale.
Leading Business Broker Strategies for Maximizing Sale Value
If you’re considering selling your business, it’s essential to find a way to make your company stand out, especially in today’s competitive sales landscape. However, unless you have prior experience selling businesses, you may not know exactly how to do so.
On that note, check out the following list of some top business broker strategies for maximizing your business’s sale value:
Get an Accurate Valuation
If you want to increase your business’s sales value, you should start by getting its current valuation, as looking closely at it can give you a clearer idea of where you can focus your efforts.
It’s critical that you make sure the valuation you get is as accurate as possible. Online calculators can give you a solid estimate, but a business broker can look closely at your business and give you a more precise result.
Take Steps to Improve Profitability
Increasing your business’s profitability is always a good thing. However, if you can do so right before you sell, you may be able to considerably increase its sale value. Here are a few suggestions:
Reduce overhead costs if possible
Evaluate current policies and procedures for any inefficiencies
Assess your business model and adjust as needed
Try to grow your customer base
Of course, you should also make sure that potential buyers are able to see your newfound new profitability, too. Organized financial statements are particularly important to have on hand.
Consider Diversifying Your Revenue Streams
Such a tactic may not be feasible for every kind of business. Nevertheless, when you’re running a business, diversity generally leads to greater stability. You don’t have to reinvent the wheel, either; even a slight variation of what you do currently can make a difference. For example, if you run a vintage clothing store, you might consider offering subscription boxes as well.
Cultivate Your Brand
Though you might not be able to assign an exact dollar value to a strong brand identity, building a strong brand is nevertheless one of the most effective business broker strategies for increasing your profitability before a sale. A recognizable brand lends credibility to your company, making it easier for your customers to stay loyal.
Keeping your brand consistent across every customer experience is critical for your success. You should communicate the same essence and brand personality wherever your logo appears, such as:
On your website
In your brick-and-mortar locations
On your social media pages
In your email marketing campaigns or ad campaigns
You can build a brand (or strengthen one) on your own. However, you may get better results if you work alongside a marketing professional. These individuals will know how to connect with your business’s target audience, a key ingredient in your company’s long-term success.
Don’t Rush the Process
Once you’ve decided to sell your business, you might be eager to get it on the market right away. However, selling your business is not a process you should rush, and neither is maximizing your business’s value. When you take the time to get an understanding of your company’s value and use the right business broker strategies to increase that value, you’ll almost certainly be rewarded with a profitable sale.
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.
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.
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.
Top 4 Ways a Business Broker Benefits the Sale of a Business
You may have had friends or business contacts recommend that you use a business broker when selling your business. But few people know just what a broker can do unless they have direct experience with the profession. Here’s a look at some of the main ways a business broker can make things easier for you during the sales process.
1. You’ll Get a Quicker Sale
Most brokers maintain a list of active buyers looking to purchase a business as soon as possible. They also typically have contacts at banks, so if a buyer is ready to commit, the broker can likely help them secure financing.
As a result, when you work with a business broker, you’ll likely be able to make a sale much faster than if you were to go it alone.
2. You’ll Have a Guide Through the Process
From negotiating a deal structure to choosing the right attorney to assist with closing, completing a sale has many more steps than you might think.
You may be new to the ins and outs of selling a business, but it’s something business brokers deal with every day. A good broker will help you through the process and make sure you don’t miss any crucial steps.
3. You’ll (Probably) Get a Better Price
Because business brokers are often in contact with numerous would-be buyers, they can help you find and choose a buyer quickly. Having such an extensive selection of contacts also means they can usually get a better price for your business.
How? Business brokers almost always have multiple buyers interested in a single business, and they use that fact as leverage when communicating with potential buyers. While it’s not an auction per se, the buyers will often try to outbid one another for your business.
By contrast, it can be challenging to find just one interested, qualified buyer when selling your business on your own, let alone several.
4. You’ll Save Time
Many people who sell a business for the first time are surprised at how long it takes. Between marketing, meeting with potential buyers, negotiating deals, and moving through the closing process, selling your business leaves little time for anything else.
If you’re deeply involved in running your business, you may find it impossible to keep up with your typical duties while attempting to orchestrate a sale. Even if you aren’t involved in day-to-day operations, handling a sale yourself can be a massive investment of time and energy.
You still need to be somewhat involved in the process when you work with a broker. However, they can handle the responsibilities of marketing and interacting with buyers for you, leaving you free to run your business or pursue other interests.
The Right Broker Makes All the Difference
Selling a business is a complicated process, but skilled business brokers can help you navigate it. Of course, selling on your own is always an option. More often than not, however, working with a broker pays off — both financially and otherwise.
Is It Worth Contracting a Business Broker When I Sell My Company?
Selling your business is an exciting time, as it likely means you’re retiring or moving onto a new venture. All too often, though, making a sale is harder than it sounds.
Some business owners are determined to stick it out and make the sale alone. Others call in business brokers.
If you’re like many business owners who are preparing to sell, you might find yourself wondering whether contracting a business broker is worth the trouble. Here are a few questions to ask yourself as you make this key decision.
Do I Have a Buyer in Mind?
Many business owners who sell independently do so because they already have an interested buyer lined up. If you plan on selling your business to an employee or existing contact, you may not need to hire a broker — you can simply work out the details with your buyer and make it official.
On the other hand, if you’re ready to sell but don’t have a prospective buyer, a broker can be a tremendous help. Brokers maintain networks of eager, qualified buyers. And because your broker is invested in getting you the best sale price possible, they can encourage interested parties to bid against one another.
Do I Have the Time to Coordinate the Sale?
Selling a business isn’t like selling a car. It’s a sustained effort with endless loose ends to tie up.If you’re an owner-operator or are otherwise deeply involved in the day-to-day operations of your business, you’ll likely find it overwhelming to add managing and coordinating a sale to the mix. However, if the role you play is relatively hands-off, you might be able to find the time.
Am I Familiar With the Sales Process?
One of the primary advantages business brokers offer is that they know exactly what steps must be taken to make a successful sale. A good broker will be able to ensure that you get an accurate valuation and help you negotiate a deal with the buyer you choose. They’ll also be able to guide you through the closing process.
In all the intricacies of the sale itself, it’s easy to forget about another important element: taxes. If you’ve never sold a business before, you may find it challenging to fully grasp the resulting tax consequences.
Taxes aren’t an area where you want to make a mistake, either. If you don’t file all necessary paperwork with the IRS or pay the appropriate amount, you could be charged with tax fraud. A good broker will help you handle all taxes associated with selling your business.
Take Time to Consider Whether a Business Broker Is Right for You
In nearly every situation, a business broker can facilitate a faster sale (and get you a better price) than if you sold your business on your own. That being said, not all business brokers are created equal.
Before committing to one, make sure you do your due diligence. When you take the time to find the right broker, they’ll be able to find you the right buyer in turn.