In order to effectively and efficiently sell your business, it’s important to know how to negotiate the selling process in order to obtain the highest value for it. It’s imperative that you enlist the services of a professional broker. While the idea of not paying a broker’s commission on the sale price may seem attractive, selling your business is not something you should attempt to do alone. Flying solo may end up being more expensive, as compared to hiring a broker. Even if you have a really small business, there are plenty of state or federal tax issues, and local regulations to consider, not to mention several crucial contracts to negotiate.
Selling your business requires expertise and experience. Commercial transactions are complex undertakings that involve a myriad of interrelated tasks and details. It can be a tall order for someone with little to no experience in selling a business to effectively manage a transaction without missing a few details that would result in the unnecessary wastage of money and valuable time. The business environment is very dynamic. Things can change so quickly that even seasoned professionals can lag behind if they don’t actively update themselves on the most recent developments.
The increasing number of services that advocate for sellers to complete their own transactions may have you wondering whether brokers are still relevant. However, there are several factors you should consider before discarding the notion of hiring a broker just yet.
Effective Marketing
One of the most significant benefits a reputable broker will offer is effective marketing. Unlike most business owners, brokers have a wide variety of resources and marketing tools at their disposal, not to mention the expertise to use those tools to maximize the exposure of a seller’s business to the right audience. Such tools and resources will enable the broker to run each marketing campaign cost effectively and efficiently. In addition to using standard marketing channels, an experienced broker who has been in the industry for some time will probably have a network of relationships with investors, clients, and other brokers that will generate some good leads.
Valuing Your Business
Putting a value on your company is easier said than done. Every business is different, with plenty of variables that have an impact on the value. Business brokers have the experience and expertise to help in proper valuation that is tailored to your industry. They also have access to transactions databases that can be used as reference points or guidelines. Experienced brokers are acquainted with standard valuation methods and can educate you in order to complete the sale.
Negotiations Can Get Tricky
Many people planning to sell their businesses are under the impression that direct negotiations with buyers is more transparent, and allows both parties to better look at their own interests. This may be true if both of you can get along. Unfortunately, it’s rarely an easy relationship. A price gap, the difference between what you expect and what the buyer is willing to pay, can be a deal breaker. Differences in opinion may also arise between you and the buyer; for example, either you or the buyer may change their mind about the initially agreed upon price. Often, tax issues come to light that may change various aspects of the deal. It is in such cases that a broker can help in negotiations and suggest a structure that will help to minimize tax burdens.
Closing A Deal
Since a business broker’s primary function is to help you sell your business, there is a much better chance that the deal will be closed in a short duration of time. A faster sale translates to a lower risk of issues such as- customer defection, predatory competition, and employee defection. Brokers attempt to set a target for completion of the transaction by means of a letter of intent in which the both buyer and seller agree to get into a deal. The letter also reduces misunderstandings and clears out any ambiguities, and ensures both parties are serious about the transaction. A letter of intent helps buyers and sellers focus on big issues rather than minor issues that may drag the deal or even kill the sale.
Business Continuity
Selling your business can be time-consuming. Hiring a business broker helps you to do what you do best- which is keep running the business while the broker is working on the sale. You will be much better off leaving some of the work to experts who have completed plenty of deals, instead of spending a great deal of your valuable time trying to work through the steep learning curve of selling a business.
Confidentiality
Before signing a listing agreement, you will want to ask your broker about the type of information that would normally be revealed, at each stage of contact with potential buyers.
It goes without saying that putting your business up for sale can expose all sorts of confidential information about you and your business. Such information could be damaging if it lands in the wrong hands. Depending on the nature of your business, a professional business broker can take several measures to uphold confidentiality. One of the key reasons for using a broker is that he or she can protect your company’s identity and only contact buyers you have approved through a blind profile- a document describing your company without revealing its identity.
Balance of Experience
Sellers are rarely experienced, while most corporate buyers have plenty of experience and have acquired multiple businesses. A broker can level the playing field for you as a seller who is probably making that one business sale. Owing to complications that may arise before the deal is ironed out, and the final contract signed, brokers also have a huge role to play as peacemakers and mediators.
A broker will also use his or her experience to address all questions and concerns or deal with tactics employed by either party that threaten to scrap the entire deal. You can count on a broker to handle issues such as, a buyer demanding that some new contingency is added to the agreement during the final stages of the deal.
A business broker is a specialist that has the knowledge, tools and connections to help you as a seller to locate buyers efficiently and cost effectively. Speak with one today!