June 28, 2024
Choosing a broker is often cost-effective, preventing underpricing, buyer mishandling, and frustrating delays
As if running your business weren’t difficult and time-consuming enough, preparing to sell it can be just as challenging. Among other tasks, you have to come up with the “right” value for your business, gather your historical financial records, prepare the marketing presentation, and find the right buyers.
But wait…there’s more. You have to entertain interested parties, and it’s hard to know which ones are serious versus just fishing around for information on your business or industry. Once you manage to find serious players, you’ll enter the never-ending (seemingly, at times) stage of digging up and sharing documents as well as the art of negotiating terms. Don't forget you still have a business to run while managing all of these tasks. They can easily pile up and become a heavy burden, which can ultimately stress you out and make you less excited about selling.
So what do you do?
Is your goal to save on fees and therefore manage all of these tasks yourself? Or is it worth it to hire a business broker to do the heavy lifting and potentially close the deal faster or at a higher value?
Business brokers wear many hats to ensure your company's sale progresses smoothly. Some of their key duties include:
Skilled brokers thoroughly analyze company financials, operations, industry trends, and growth rates to ensure an accurate valuation. Setting a fair asking price aligned with actual market value attracts serious buyers rather than window shoppers just kicking the tires.
When representing the seller, the broker's priority is negotiating the best deal on the owner's behalf. They market the business in an enticing yet truthful light, evaluate offers with the seller’s goals in mind, and leverage their expertise during negotiations to maximize pricing and favorable terms.
Talented brokers craft compelling marketing materials that showcase your company’s strengths and potential. They conduct targeted outreach within their extensive buyer networks to identify good fits and pique interest while carefully controlling how much information gets shared. When marketing to potential buyers, brokers implement confidentiality agreements to disguise a seller's identity. This maintains leverage in value negotiations by controlling information flow. Information leaks can sabotage deals by eliminating the element of competition among interested parties.
During buyer vetting, brokers adeptly manage document sharing and buyer queries by providing requested company data to satisfy scrutiny without overexposing sensitive details. They also coordinate site visits and meetings across seller and prospective buyer teams.
When structuring the deal, brokers seek creative win-win solutions that favorably align pricing, payment forms, leadership transitions, asset transfers, and timelines for buyers, sellers, and lenders. Their expertise in negotiating terms often yields optimal outcomes.
Talented brokers lift a massive burden off the owner's shoulders by serving as liaisons, advisors, and sales commanders throughout the messy intricacies of divesting a business. Their expertise makes the process easier.
Divesting an owner from daily functions can sink a company if their attention wanders from meeting customer needs, overseeing staff, or steering strategy. Prioritizing a sale leaves leadership gaps, compromising quality, service, and revenues. Brokers enable owners to remain operationally focused by carrying the sales burden.
Selling a business independently is challenging due to personal stresses and complexities in the transaction elements. When it comes to whether you should hire a business broker, there’s no direct answer. The answer will depend on considerations like your current bandwidth, risk tolerance, help needed with the numbers, and timing.
You may feel confident to go it alone since ultimately no one knows your business better than you do. This will certainly save on some closing costs, which can eat into your hard-earned sale proceeds.
However, with over three-quarters of listed businesses opting for brokers, their fees become a strategic investment, ensuring maximum value for years of hard work. In this regard, choosing a broker is often cost-effective, preventing underpricing, buyer mishandling, and frustrating delays.
Select brokers carefully, meet them in person, and provide transparency into operations for a smoother sale process. Sellers who invest in the right brokerage team increase their chances of success at closing.
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