What Every Seller Should Know About Business Valuation
Working day in and day out in your business, you probably assume you know everything there is to know about it, including how much your business is worth. However, a M&T Bank survey in 2022 found that 98% of business owners didn’t know the value of their business.
There are many reasons to know how much your business is worth. You may want to buy out a business partner. You also can use a valuation to help guide the strategic planning for your business. Most often, business owners need to know the value of their business when they’re ready to sell it.
Selling a business is no small matter. There’s a lot to know and a lot to keep track of. Having business brokers by your side long before you plan to sell your company can help you get to closing and get the most out of your business.
When you’re ready to sell, business brokers can help you find the right value for your business. Here’s what you should know about business valuation.
What Is a Business Valuation?
A business valuation is a process used to determine the total value of your company and its assets at a specific time. Through the process, independent appraisers or business brokers qualified to evaluate businesses will assess your business’s assets, cash flow, market position, future earning potential, and comparable businesses in your market.
The business valuation is a price you and a buyer might be able to agree on.
Knowing the worth of your business can help you negotiate the price you want to get when your company sells. It also can help you recognize what buyers might see as valuable or areas you can work on to increase the value of your company.
How Business Brokers Evaluate Your Business
Many approaches can be taken to valuing a company. Here are three main approaches business brokers may use to determine the worth of your company.
Income Approach
This approach determines your company’s worth by calculating the income your business will generate in the future and discounting it back to a present value. This method is useful when you’ve established stable and predictable earnings.
Market Approach
A market approach values your company based on prices of comparable businesses that have sold or the value of similarly situated companies.
Asset Approach
This valuation focuses on the net asset value of your business. With this method, you would subtract all liabilities from your total assets to determine your net asset value. The asset approach is typically used for companies that are underperforming.
To facilitate business brokers valuing your company, you must present profit and loss statements and balance sheets for the last three to five years, licenses, deeds, any tax filings and returns, an overview of your business, and your business plan.
Plan With Business Brokers
To attract the right buyers and arrive at closing with the maximum negotiated price you’re comfortable with, consider getting business brokers on board long before you plan to sell. Business brokers can help you understand business valuation and find value in your company that you might not have known existed.
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.
Skilled Business Brokers Take the Time to Understand Your Business
As a business owner or founder, you might think no one knows your business as well as you do. However, when the time comes to sell your company, consider seeking out business brokers, such as Sunbelt Business Brokers.
Business brokers will take the time to get to know and understand you and your company, making them pivotal to maximizing the strategy and profitability of the sale.
Sunbelt Business Brokers has deep experience working with small and medium businesses, handling every detail of a sale from beginning to closing. That experience, combined with understanding your business, is key to getting you to close quickly and with the best possible sales price.
What Are Business Brokers?
Business brokers, often called intermediaries, are individuals or companies that can help you buy or sell a business. Selling a business can be a long and complex process and can take six months to a year.
Business brokers, such as Sunbelt Business Brokers, often know your industry and possess specialized skills to get you quickly from the thought of selling your business to being sold — and at a higher price than you may have expected.
How Understanding Your Business Helps
A key to a successful sale is bringing business brokers into your company long before you plan to sell. Skilled business brokers like Sunbelt Business Brokers use that time to listen, watch, learn, and provide objective guidance.
Here’s how that helps you optimize the sale of your business:
Valuation
While an online business valuation calculator can give you an estimate of what your business is worth, business brokers know an accurate business valuation takes skill. To get the most precise valuation, business brokers combine experience and specialized knowledge with a full understanding of your business and how it works.
Once you understand where your business’s value lies, you can work with your brokers to set a strategy for getting top dollar at closing.
Competitive Advantage
Skilled business brokers who take the time to understand your business know how the intangible assets can distinguish you from competitors, making your business more attractive to potential buyers. Consider these intangible assets:
Intellectual property
Brand recognition
Customer loyalty
Reputation
Knowledgeable business brokers know how to weave your intangible assets into a narrative that sets you apart in the marketplace and draws buyers to you.
Matching
Business brokers maintain a vast network and spend time with potential buyers. As a result, they have a deep understanding of the businesses those buyers are seeking. These business brokers can match you to buyers they are acquainted with in their network, giving you the possibility of reaching the negotiating table faster.
Selling a business you created and nurtured into a successful company can draw your emotions to the surface. Business brokers, who have handled many previous deals and now understand your business, can be an objective beacon to get you through to a better deal than you could have obtained on your own.
Understand What You Want From the Deal
When looking to maximize the profit from the sale of your business, reputable and skilled business brokers are willing to take the time to learn about you and your company to deliver that goal. So consider taking your time to know and understand the business brokers you plan to hire to sell your business.
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.
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.