Why Use a Business Broker to Sell a Small Business?
According to experts, up to 90% of people fail to sell their businesses. Many business owners often ask themselves, “How to sell my business?” They end up debating whether to do this endeavor on their own or to use a broker.
People sell their businesses for multiple reasons, such as losing profit, wanting to do something else, wanting more time to themselves, or other reasons that aren’t listed. If you fail to sell your business, you may be stuck with debt or something you don’t want. It’s a challenging process, which is why using a broker plays a crucial role; continue reading to learn why you should get one.
Pricing
A knowledgeable business broker can assist you in obtaining the highest possible price. They know the market price structure and can provide important insight into how to price a small business.
If you overprice your business, the majority of prospective buyers will never ask about it. If you undervalue your business, you will not get what it is worth.
Save Time
A competent broker will free up time for you to operate your business and enjoy your personal life. It’s advantageous to have an expert on your side.
Apart from operating your small business, you have a lot of other responsibilities. Why not delegate the hard work to a business broker while you enjoy your time away from your company?
Confidentiality
A reputable business broker would ensure that a non-disclosure agreement or NDA is completed before disclosing anything about your company or even knowing its name. They may assist in explaining why a potential buyer will only get a limited amount of information before making an offer.
A seasoned business broker will weed out bidders who are just seeking information. They will spend time educating genuine buyers about the value of the business.
High-Quality Resources
Professional business brokers have access to resources and industry experts. They would know which SBA banks are lending due to their expertise.
They are acquainted with knowledgeable lawyers that can assist in crafting contracts or ending the sale of a business. They also offer a list of excellent accountants that are familiar with business finances.
Negotiation
Why waste time arguing back and forth when an expert can represent you to get your desired price. By using a business broker, you can remove the worry and personal aspects of the situation.
Marketing
A competent business broker will spend time developing a concise and effective business review (CBR or CIM) that summarizes all of your company’s critical information. A well-crafted presentation will assist the buyer in understanding the advantages of acquisition.
They’ll be able to provide an excellent overview with their acquisition advisers. A strong CBR is an effective instrument for assisting in the sale of your business.
Supportive Financial Representatives
A business broker can collaborate with you or your accountant to explain and clarify your company’s financial situation. This is often referred to as normalizing financial statements, and when presented properly, can help potential buyers understanding your business’s actual financial performance.
Tools
An expert broker will invest in and have access to various tools to help sell your business. They will have access to forms, databases of potential buyers, excellent websites, and much more. Before choosing a broker for the job, it’s advisable to ask them about the tools and techniques they will use to sell your business.
Brokers may use their years of expertise to look around corners and predict possible transaction difficulties in advance. They are intimately acquainted with each stage of the company’s selling process and will offer valuable guidance.
Sell Your Business Checklist: What to Prepare With Your Broker?
Approximately 20%-30% of small businesses listed for sale are successfully sold. In order to be better prepared, here are some items that are required to sell your business:
Required Records & Important Information Before Going To Market!
Prepare the following things before placing the company on the market:
- Three years worth of federal tax returns
- Three years worth of profit and loss statement and a balance sheet
- Three years worth of monthly bank statements
Ensure that you are aware of the proper yearly adjusted net income (cash flow, SDC) for the past three years. Serious buyers will want to know this information early on in the purchasing process, as well as how you obtained it from your tax returns and financial statements.
Obtains a Third-Party Business Valuation
Obtaining a competent company appraisal/valuation from a third party is essential for the selling process. 70% of all small businesses never sell because of the excessive asking price or poor deal structure.
The third-party valuation will be used by a variety of people throughout the selling process:
- Potential business buyers
- Lenders/financing companies for the buyer
- Other advisors/parties to the transaction
Prepare Your Team of Advisors, Attorney, and Accountants
A critical component of being prepared to sell a small business is having a reliable team of experts. This is not the time for your advisers to be on vacation. Make sure you have lined up expert advisers for the length of your transaction.
Database of All Potential Buyers
Maintain a folder or online database of all contacts, notes, and documentation. You want to ensure that you have backup purchasers if your initial one pulls out during the selling process. Maintain all escrow information, purchase agreements, signed non-disclosure papers, contact information for CPAs, attorneys, and other relevant information in this folder throughout the selling process.
Create a Business Profile
Buyers will need a great deal of information about the company being sold. Rather than having to describe the company to many buyers, create a one-page description of the business.
Here is the following information that should be in your one-page description:
- Business’s history
- The date it was founded
- Number of employees
- Significant characteristics
- Recommendation and strategies to run the business
- Geographic location
- Competition
- The reason for selling
- Amount of training provided following the sale
Non-Disclosure Agreements
Before disclosing any information, have all prospective buyers sign and date a Non-Disclosure/Confidentiality Agreement. Let them know the critical nature of maintaining the confidentiality of the company’s transaction and the legal consequences of failing to do so.
Gain Maximum Exposure
The most critical factor in this process is to ensure that large numbers of qualified buyers are aware that the business is for sale. You should expect to invest between $400 and $1,000 in advertising and marketing to reach an adequate amount of buyers.
Sell Your Business Tips: Finding a Reliable Broker
Many states require a broker to be a licensed real estate agent to sell their business. You can verify if an agent is properly licensed by doing a check on your state’s database. You should also make sure that the expert you choose has the experience and is sensitive to your requirements.
Finding a reliable broker can be challenging, but we are here to help. Contact Fusion Business Services to help sell your business today.