Want Your Deal to Run Smoothly? Hire a Business Broker
I was recently talking to someone who lived next door to a business owner. That owner had never thought about selling their company, but was approached by a customer, and now the two are negotiating a deal. I hope it works out well, but I’m not holding my breath. Negotiations directly between a seller and a potential buyer can get messy. Here’s why the owner would have benefitted from enlisting a business broker instead:
Business Brokers Establish the Sale Price: How will the seller know that an offer is fair? A business broker will help you establish a sale price based both on the current state and profitability of your business as well as industry standards set by the previous sales of businesses like yours. A buyer will offer you what they want to pay for the business. It’s up to you to enlist a team that will get you the price you deserve. Another benefit of understanding value from the beginning is that your business might not be worth enough for you to sell it now. If that’s the case, you will understand how value is derived and be able to take time to improve the valuation before you sell rather than wasting time with a buyer that falls through.
Business Brokers Create Demand: Have you heard the expression “one buyer is as good as no buyers”? The idea is that when you are in negotiations with only one party, without actively putting your business for sale on the open market, you have little leverage in the negotiations. When one buyer knows they are the only buyer at the table, they will often drag negotiations out, make low-ball offers, and may ultimately back out of the deal. When your business is actively for sale, you have the power in negotiations to tell a buyer to make a move or move on.
Business Brokers Protect You: Time and confidentiality are two assets a business owner holds dear throughout the process of selling. Confidentiality is fairly obvious. A business broker will ensure that the marketing of your business is done in a way that guarantees the general public won’t know you’re for sale, will require all qualified prospective buyers to sign appropriate confidentiality agreements, and will control the gradual release of your confidential information to the buyer over the course of the transaction. The importance of protecting an owner’s time is not as easy to see. In a business sale, the prime value driver is the performance of the business. If an owner becomes preoccupied with managing the sale process, attention may drift from running the business, which may cause a decrease in value, which could torpedo any potential sale. A business broker will manage the sale process, allowing an owner to keep his or her “eye on the ball,” running the day to day operations of the business to keep it strong.
These three roles a business broker fills ultimately add up to:
- A higher sale price
- A smoother process
- A faster and more probably successful closing.
Without their expert guidance, you risk selling your business on someone else’s terms or worse, damaging your business through an attempt to sell in a way that takes years to recover. If you’re thinking of selling, call Calhoun Companies today, and stay tuned for future articles about what to look for in an ideal business broker.
- Business brokers establish the sale price based on profitability and current state of your business
- Business brokers create demand to leverage the negotiations
- Business brokers provide confidentiality