“The only source of knowledge is experience.” – Albert Einstein
Experience Matters in Business Sales
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 hopefully growing their business, and correctly focus their energy into creating a successful business. Once it is actually time to execute their exit strategy, many sellers that do not have a family member or employee to buy or take over the business may not know where to turn. Such business owners should carefully select an experienced business broker and heed their advice concerning the potential asking price of the business as well as the manner in which the sale will be conducted. Only professional business brokers have the requisite experience of having actually brokered business sales and the resulting accumulated knowledge necessary to properly advise potential business sellers of the entire business sale process.
Business Brokers Should Value Business Properly
- It takes experience and specialized knowledge in order to properly price 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 potential business seller’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 or 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 any broker business to properly evaluate 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. The qualification process begins with having every buyer sign a non-disclosure statement prior to receiving any confidential listing information about the business. The non-disclosure statement requires the potential buyer to keep the business sale confidential and to only go through the broker during the initial phase of the discovery process. It is important to also note that publicly disclosed business information contained in the ‘blind advertisement‘ does not disclose confidential information about the business. This includes the identity of the business itself, the exact location, and any pictures that will enable a viewer to identify the business. All potential buyers must sign the non-disclosure statement prior to receiving this information.
Ensure Buyer Has Sufficient Funds
No potential business seller 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 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 typical 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. It is the 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 this 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 have no reason to 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 your 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.