One of the most overlooked and cost-efficient ways of selling a business is through a business broker. You might be wondering ‘Why work with business brokers when I can sell it myself?’.
Many business owners believe that selling a business is a straightforward process, but it can be complex and time-consuming. There are many legal, financial, and accounting considerations to make before proceeding with the sale, and even then, you will want to make sure that the deal works well for you and the business you worked hard on.
If you are wondering why working with a business broker is the better option, here are four reasons why:
It is imperative that you not only consider working with a business broker but also assess the experience and track record of the individual in the industry because:
First, transaction agreements, whether those are share sales or asset sales, can be lengthy and detailed, and every word in those agreements matters. Having someone with the experience and expertise to negotiate the dozens of points that comprise a transaction agreement is beneficial in making sure you get good value for your business, and are protected from possible future surprises”.
Most business owners will sell a business once, twice, maybe three times in their career, but business brokers deal with this process daily. Hence, they are more capable of examining the documents and facilitating the sales process with greater efficiency.
Second, a good and experienced business broker will understand how to structure deals in ways that work for both the buyer and seller. Of course, there’s only a deal if it works for both sides, and an experienced broker will know how to create and navigate those waters to bring both parties to an agreement.
Lastly, selling a business is a highly emotional process. As an owner-operator, not only are you parting with a business that you have operated for years and has really become a part of yourself but the negotiation process itself can also be stressful and difficult. Some days it feels like things are moving forward nicely and other days can feel like huge setbacks.
An experienced broker will be able to help you navigate those waters and keep everything on an even keel. They are able to manage the emotional strain that can often affect both parties, their judgment, and their willingness to compromise – either making them too willing to compromise just to get it done and over with or unwilling to compromise because of the frustration with the process.
Therefore, since business brokers are not emotionally invested in the business, they can keep a steady hand on the tiller through.
Business owners are typically not very effective at putting a value on their own business, and the reasons are clear and understandable.
A business owner remembers the sweat equity they put into starting the business, the huge risk they took, the financial stress at different stages of the business, maybe indebtedness, and to some even lifestyle sacrifices like missed soccer games and times with the family. In the seller’s mind, all of these add up to some value, but to the buyer, it’s impossible to put a valuation on those.
An experienced broker can help the seller of the business understand what the market will see as the value of their business and help manage expectations around the whole valuation piece.
Different brokers operate in different ways. Some are a little more passive, we call those fishers. Much like a dating service, they try and build up an inventory of buyers and sellers, and hope that there are some matches there.
On the other hand, there are brokers who operate like an executive search firm and are very targeted in their approach. They find suitable buyers for the business seller and have methodology and expertise in researching, pre-qualifying, and connecting with potential buyers of the business.
The pre-qualifying stage is crucial to the process. You want to make sure that the buyer has the financial capacity and management experience to execute on a deal and operate the business. Nobody wants to waste time negotiating with someone who, at the end of the day, doesn’t have the capability of executing on the deal and running the business.
Experienced brokers understand the process that will allow them to find buyers prospective buyers of the business faster and with more accuracy than a business owner could do on their own.
The fourth advantage of using a business broker, and one that we take very seriously at Catchfire, is the whole notion of remaining anonymous when selling your business.
Our philosophy is that flying under the radar, staying low key, and staying anonymous for as long as possible in the process and even then, revealing identity under the cover of non-disclosure agreements is a critical part of the sales process.
Having your employees, competitors, bankers, suppliers, and creditors know about the impending sale can negatively impact your business operations and valuation.
Hence, good business brokers can represent their clients anonymously until a potential buyer is identified, pre-qualified, and has executed a non-disclosure agreement. It’s vital that the seller has greenlit the continuing conversation with that prospective buyer to make sure they’re comfortable with whom their confidential information is going to be revealed to.
When you’re selling a business, expect that the buyer will try to learn everything they possibly can about your business. From financial records, contracts, employment, agreements, lawsuits, and even customer feedback, they will scour your company more thoroughly than probably anybody ever has. Working with experienced business brokers ensures that you’re prepared for all these.
Selling a business is a complicated undertaking. On average, it takes around nine months to sell a small business, and this can take longer depending on a lot of different factors. Doing it yourself means diverting your attention from operating your business to handling the sales process. This includes qualifying the buyers, negotiating, fulfilling the documents, structuring the deals, and many, many more.
Catchfire’s team has over 30 years of experience in the industry; we understand the nuances of the process and are adept at representing your business, ensuring that your interests are covered throughout.