Why Hire A Business Broker?

Reasons to Hire a Business Broker to Sell Your Business

“It takes less time to do a thing right than it does to explain why you did it wrong.” – Henry Longfellow

When contemplating the sale of their business, many business owners will make the short sighted decision to try and avoid paying a broker’s commission by selling the business on their own. In the great majority of instances, ‘Do It Yourself’ or DIY sellers will not be  successful in selling their business, especially compared to those who do hire a business broker. A professional business broker protects the confidentiality of the sale, prices the business properly, and holds the deal together during the often lengthy period encompassing the due diligence period up until closing..

Importance of Confidentiality

  • The DYI sellers who try to sell their business without a business broker face a daunting task.
  • A confidential business sale must not disclose the name or specific location of the business being advertised.
  • Otherwise anyone with an internet connection (including employees, customers, or suppliers) will know the identity of the business.
  • Without an intermediary (or business broker) between themselves and potential buyers, the business sale will not be confidential.
  • Even if a DYI seller is clever enough to post a ‘blind advertisement‘ online which hides the name and specific location of the business, the buyer needs someone to contact as a next step.
  • If the seller himself or herself is personally the point of contact, then all confidentiality is lost.

Properly Price Business

Properly pricing a business is no easy task, and often takes years of industry experience. The first step involves properly gathering and analyzing the correct set of financials. The financials should be the tax returns or profit and loss reports of the business for the past several years.  Often, information is missing or incomplete, so one must use the best estimate of the financial picture of the company. Then the adjusted owner benefit must be calculated. This is the true amount of economic profits derived by the owner of the business. The adjusted owner benefit must be properly calculated and is the most important factor when pricing a business.

Presenting Business to Potential Buyers

A professional broker should prepare a comprehensive listing package. This should intelligently present the financials of the business, along with a detailed write-up of the business which explains its operations, staffing, and future growth possibilities. Very few DYI sellers have the experience or time to prepare such a listing package that caters to most buyers seeking to buy a business. Additionally, the business must be prominently advertised (confidentially) in several websites and publications where prospective buyers can see the listing. The more buyers that see a business for sale and have an opportunity to buy the business, the higher price the seller will receive!

Holding the Deal Together

When a buyer is found, an experienced and professional business broker should always serve to ‘hold the deal together’. Once negotiations between the buyer and seller commence, both sides of a deal must communicate properly and clearly with each other. Often, this is taken for granted and deals may collapse due to a miscommunication. Contentious issues inevitably erupt at some point during the lengthy period (often 30-60 days or more) between the time that a deal is ‘under contract’ and closing.

Business Broker Anticipates Problems

An often overlooked role of a professional business broker is anticipating problems which may arise to derail a deal. Often, educating both sides so they know what to expect can prevent such problems. For example, many buyers of businesses are worried that they will not have the help of the seller after the deal. In order to ensure a smooth transition, a business should anticipate this problem, discuss it with the seller, and create an action plan that will put the buyer’s worries at ease. Without this ‘glue’ that holds a deal together, a seller may find themselves in the unenviable position of having wasted their valuable time and resources in securing a buyer, but only to have the deal fall apart before its completion.

Why Selling Yourself Can Cause Business Disruptions

  • Most business brokers in Palm Beach County require every potential buyer to sign a Non-Disclosure Agreement (NDA) before being given any confidential information about a business (including the name of the business or the city of where the business is located).
  • This is primarily because a business can be seriously harmed if their competitors, customers, suppliers, or – most importantly – their employees know that the business is for sale.
  • Many unscrupulous prospective buyers – or simply competitors who see the advertisement – can wreak havoc on a business that they know is for sale.
  • Employees and customers can be stolen, business can be interrupted by ‘walk-ins’ from buyers seeing the ad, and even landlords can make lives miserable for tenants who are known to have their business for sale.
  • Always keep the listing and advertising process confidential..it is the seller’s best defense against harming their business during the sales process.

Do it right the first time! Hire a professional business broker to sell your business. You’ll end up getting far more advertising exposure, ensuring the confidentiality of the sales process, and avoid a tremendous amount of risk when trying to sell on your own.

Give Martin at Five Star Business Brokers of Palm Beach County a call today for a free evaluation for your business at 561-827-1181.