The Broker’s Contribution

The success of any business, especially a small one, rests to a great extent on the owner’s personal direction and leadership. Therefore, an owner should ask himself this question: “Can I afford to give up four or more hours a day from actively running my business, a profession I know, to pursue the activities involved in selling my company, a profession I don’t know?” There’s an old adage that says, “A lawyer who represents himself has a fool for a client.” The same can be said about a Seller who attempts to negotiate the sale of his own business.

For clarification, a Business Broker is a person (or company) who not only acts as an intermediary to bring the buyer and the seller together, but also helps to guide the entire sales process. Unfortunately, many owners look at the commission they will pay rather than the objectives they will achieve. As a result, they usually lose far more in time, trouble, lost sales and lower selling prices than the Broker’s expertise would have cost them.

The sale of any business, whether for $50,000 or several hundred thousand dollars, requires almost as much time, effort, and knowledge as the sale of a multi-million dollar corporation.

CONFIDENTIALITY: If an owner tries to sell his business himself, all confidentiality is lost. Employees become worried about losing their jobs and start looking for other employment. Suppliers become concerned about payment of their bills and start demanding COD payments on future orders. The greatest problem, however, comes from competitors. They start actively soliciting the seller’s customers. While no Broker can guarantee absolute confidentiality, the potential for keeping the sale a secret, even months after a closing, is a common occurrence.
COUNSELING: The Broker must be able to analyze the field of business opportunties and how the sale of the business can, or can’t, fulfill an owner’s future goals and desires. In addition, the Broker must know interviewing procedures so he can tell the real buyers from the lookers, and be able to guide the principals through the complexities of transferring business ownership to a successful closing of escrow.
BUSINESS VALUATIONS: Selling a business is not only a financial transaction, it is an emotional one. To most entrepreneurs, their business is their life. Selling it is like selling part of their family. With such an attachment, putting an overly high value on the business is a very common fault, which, unfortunately, greatly affects the potential of selling the business.

Without an emotional attachment, a professional Broker can accurately appraise the local selling market, utilize various pricing formulas and current business valuation techniques to come up with a Fair Market Value and help the seller formulate the terms that will result in the quickest and best sale possible.
TAX AND LEGAL EVALUATIONS: While not an accountant or a lawyer, a good Broker can point out areas that need special attention, i.e.: potential depreciation recapture, reconstruction of financial statements to show the true owner cash flow, review the various indemnifications and warranties a seller might have to sign, the advantages and disadvantages of having a buyer assume or wrap existing business liabilities, reviewing existing interest rates and terms for seller carry back notes, etc.
CREATING AND IMPLEMENTING MARKETING PLANS: Creating the marketing package, placement of advertisements, conducting interviews with prospective buyers, showing the business, handling the negotiations, drafting the purchase contract, and following through to the successful closing of escrow are at the core of the Broker’s services. A good Broker can be of great value to a Seller, and no Broker or a bad Broker can cost the Seller dearly.
NEGOTIATIONS: Emotions are also strongly involved in negotiations. I have seen the sale of multi-million dollar corporations fall apart because of a chance remark. If there is any misunderstanding or argument, let the principals get mad at the Broker, not at each other. As a result, acting as a third party go-between, a good Business Broker will obtain a better price on better terms than the Seller could get representing for himself.

Don’t jeopardize years of hard work and accomplishments. Let a professional Business Broker help you in the most important sale of your business career.