If you are considering selling your business, it might be wise to consider hiring a business broker to assist you.
Business brokers are similar to real estate brokers in concept but quite different in practice. Almost everyone is, at one time or another, looking for a house. Only a small percentage of the population is ever looking for a business to buy. Business brokers specialize in finding that small percentage. Business brokers have different skills, ones that are more specific to the work we do. Consider the following:
- Getting to the buyers – Most real estate agents are superb at what they do; selling real estate. But real estate is a completely different business and requires different skills and knowledge. Using a real estate agent to sell your business is like using an Ear, Nose and Throat guy to replace your hip. Certainly he might get it done eventually but why not go to someone who specializes and does it everyday? Remember that one hundred percent of the people that walk into a real estate office do so because they are looking for a house or property. None of them walk in looking for a business. On the other hand, everyone that contacts a business broker is looking for a business.
- Establishing Value – Establishing the value of a business is a science rather than an art. Yours is not the only tire store/software company/restaurant/B&B/convenience store/ distributor/dry cleaner/coffee shop/publisher/real estate company/automobile dealership/accounting firm/hotel/security company/etc. that has ever been sold. Such businesses are sold by business brokers every day across the country and around the world. A good business broker can tell you what your business is worth based on what similar businesses have sold for. But a good business broker will also use other tools to determine the value of a business. For instance, a good business broker will estimate value based on income “cap rates” (used extensively in the commercial real estate business), investment return rates, carry-back capability (the amount of debt the business’ cash flow will support) and historical cash flow multiples among other methods. You can learn what your business is really worth by using a business broker.
- Marketing – Business brokers market to business buyers; and good brokers know how to find them. Good brokers know that buyers are now coming from around the world and they have established marketing procedures to reach them. As is the case in real estate, the vast majority of business buyers begin their search on the internet. When buyers search the internet for businesses, business broker sites are where they end up. If your business is not listed with the right business broker, no one will know it’s for sale.
- Confidentiality – In our experience, the greatest concern of business sellers is confidentiality. If their employees find out, they will look for other jobs. If their customers find out, they will look for other vendors. If their competitors find out, they will try to steal customers and employees. A good business broker knows how to market a business while maintaining strict confidentiality.
- Negotiating with the buyer – A business transfer entails much more than signing over the lease. Many businesses have inventory. Others have fixtures and equipment. Still others have what’s called intellectual property. (An example of this is a franchised brand such as Holiday Inn or Wendy’s.) A good business broker understands how both tangibles and intangibles are valued and can be used in the negotiations.
- Finding the financing – As in real estate, a business broker gets paid a commission when the transaction is completed. As such, a business broker is keenly interested in shepherding every aspect of the deal to make sure the closing occurs. A good business broker maintains sources of financing and he or she can take a deal to the most appropriate funding source.
A business broker, like a real estate broker, a stock broker or a heart surgeon, is a specialist. A good broker knows the market – locally and nationally – and can give you a realistic assessment of your business’ value. A good business broker knows how to find buyers and how to market your business confidentially. A good business broker can advise you during the negotiation. And a good business broker can assist the buyer in finding the funding to close the deal. If you are considering selling your business, talk to a reputable business broker.
We’ve put together a list of five important characteristics of a good business broker. To download your FREE copy click here.