“The only source of knowledge is experience.” – Albert Einstein
Find the Right Business Broker
Many business owners spend the vast majority of their working life never once thinking about how to sell their business. They are rightfully concerned with operating and growing their business. Once it is actually time to execute their exit strategy, many business owners that do not have a family member or employee to buy or take over the business may not know where to turn. Business owners should carefully select a business broker experienced selling business in which the business operates and able to give a fair and justifiable business valuation based on valuation multiples comparable to other similarly sold businesses. The right business brokers must also be well aware of the need to confidentially advertise the business, qualify all prospective buyers, and guide the business owner through the selling process by anticipating issues that will need resolution.
Experience Needed to Value Business Properly
- It takes experience and specialized knowledge of local industries, customs, and norms in order to properly price (and list) a business for sale.
- Some potential business sellers may seek a formal business appraisal.
- This is often costly, however, and is usually done only when there is a buy-out between two business partners or when ordered by a court.
- It is far more common for a potential business seller to receive a free business evaluation from a trustworthy business broker.
- The business broker should not charge up front fees, should publicly display their own current business listings, and should have an online presence suitable for review.
- The free valuation process does takes effort on the business owner’s part as well.
- In order to value the business properly, a professional business broker will request relevant documents necessary to sell the business.
- This may include financial documents such as tax returns and profit and loss statements, or business documents such as an equipment list or lease.
- Properly analyzing the financials and other documents with the cooperation of the seller is necessary in order for a broker business to evaluate the business.
- Only an experienced business broker who has listed, valued, and sold businesses in the specific industry can determine the approximate worth of a business.
Business Brokers Should Qualify All Potential Buyers
A critical difference between professional business brokers and real estate brokers who primarily sell residential or commercial real estate is knowing how to qualify all potential buyers so the business is not disrupted during the selling process.. The qualification process begins with requiring every buyer sign a Non-Disclosure Agreement (NDA) prior to receiving any confidential listing information about the business. The NDA requires the potential buyer to keep the business sale confidential and to only go through the broker during the discovery process. Publicly disclosed business information contained in the ‘blind advertisement’ should not disclose confidential information about the business. This includes the identity of the business itself, its city or address, and any pictures that will enable a viewer to identify the business.
Ensure Buyer Has Sufficient Funds
No business owner wishes to waste his or her time with a potential buyer who does not have sufficient funds to buy the business. During the qualification process, the business broker should at some point either receive proof of funds from the buyer, or a lending pre-approval letter from the buyer’s bank. This step normally occurs prior to the potential buyer receiving confidential listing information about the business, or prior to any meeting between the potential buyer and the seller.
Business Brokers ‘Hold the Deal Together’
Unlike real estate brokers or other professionals (such as attorneys or CPAs) who do not sell businesses, only business brokers have the experience necessary to anticipate issues and problems that will need to be addressed in order to actually close the deal. The issues and problems should be effectively communicated to both the buyer and the seller so that they may be negotiated and discussed before serious disputes or misunderstandings arise. This way, trust may be established between the principals which makes a successful closing far more likely. It is this ability to hold a deal together that is often an overlooked but vital role of the business broker.
Example of A Business Broker Holding the Deal Together
- Let us suppose that Jack is selling Jack’s Auto Shop with the assistance of a professional business broker.
- The broker has located a buyer – Adam – who is ready to make an offer on the business.
- Prior to submitting a Letter of Intent, Adam consults with the broker about his potential offer.
- Although not part of the letter of intent, Adam mentions that it is imperative that he be allowed to speak with Jack’s four employees prior to the closing.
- Adam wants to ensure that the employees remain employed (with him) as auto mechanics after the closing at the same salaries they are currently receiving.
- The business broker, however, knows that Jack is adamant that the sale be kept strictly confidential from everyone (including and especially his employees) until after the closing.
- Rather than letting this critical issue fester and come up later in the formal due diligence process, the business broker sets up a meeting between Adam and Jack.
- Here, all parties can discuss the issue head-on and come up with an amicable resolution.
- In this instance, Adam understands Jack’s need for confidentiality, but Jack understands Adam’s desire to ensure that the employees will not leave after the sale.
- At the business broker’s suggestion, Jack agrees to stay and work for Adam on a part-time basis after the sale for a period of three months.
- Adam agrees that Jack’s presence after the sale will give the employee’s a sufficient level of comfort and stability so that they will not wish to quit their jobs.
When deciding who to contact when it comes to sell your business in South Florida, be sure to contact an experienced business broker who has the requisite knowledge to price the business properly, list the business confidentially, qualify all potential buyers, and hold the deal together through a successful closing.
Give Martin at Five Star Business Brokers of Palm Beach County a call today at 561-827-1181 for a FREE evaluation of your business.