Benefits of Using a Business Broker

In the last issue (#11), we discussed The Importance of Setting a Realistic Offering Price. In this issue we will discuss the Benefits of Using a Business Broker.

" To know that we know what we know, and that we do not know what we do not know, that is true knowledge." Henry David Thoreau

Benefits of Using a Business Broker

A good business broker offers the following overall benefits throughout the sale process:

Overall benefits
  • Confidentiality is of utmost importance. Brokers know how to maintain control of the release of information to control confidentiality throughout the process.
  • Experience is necessary to handle the complex issues encountered in a business sale. A broker’s third-party perspective of a business enables anticipation of obstacles to a sale and appropriate resolution of issues that arise.
  • Brokers maximize seller proceeds by establishing a reasonable offering price of the business while also considering structure and taxation issues. Brokers can also help maximize seller proceeds through the negotiation process.

A good business broker/intermediary can help solve the puzzle of how to successfully sell your business, including providing an opinion of value, identifying obstacles that must be overcome and spotting opportunities to increase the value of the business.

  • Brokers streamline the sale process and timeline to minimize business interference. Business continuity is an extremely important factor, especially while the sale process is underway. A lengthy and unwieldy sale process increases many risks including confidentiality breaches, business declines and customer and/or employee defections.
  • Brokers reduce owners’ frustrations during the sale process. Selling a business is rarely easy, and there are always emotional twists and turns before a transaction is completed. A good broker can help sellers persist when the inevitable emotional issues are encountered.
  • Brokers can be a great source of referrals for qualified professional advisors with business sale experience such as valuation specialists, attorneys and accountants. Brokers coordinate the efforts and efficient use of outside advisors. As a result, professional advisory fees are often minimized.

Following are specific benefits of using a business broker. These are detailed by various phases of the sale process:

Benefits - presale (exit) planning

  • Brokers provide an opinion of the business’ value.
  • Brokers identify obstacles to a successful sale.
  • Brokers identify opportunities to increase the value of a business.

Benefits - preparing the business for sale

  • Brokers prepare a marketing package (confidential profile) of the business.
  • Brokers prepare a “blind” description of the business for advertising purposes.
  • Brokers develop and implement a confidential advertising plan to confidentially expose the business.
  • Brokers prepare financial analysis information, including normalized (recast) financial statements to document Sellers Discretionary Earnings (SDE).
  • Brokers establish a fair offering price and prepare supporting documentation.

Benefits - finding buyers

  • Brokers review their database of prospective buyers.
  • Brokers prescreen and qualify buyers inquiring about the business and screen out “tire-kickers.”
  • Brokers obtain a confidentiality/non-disclosure agreement from buyers before releasing confidential information.
  • Brokers prepare sellers for buyer meetings, including helping them understand buyers’ motivations and perspectives.
  • Brokers create competition by identifying multiple prospective buyers.
  • Brokers maintain continual follow-up contact with interested buyers and control the process.

Benefits - offer stage

  • Brokers receive and present offers to sellers and help sellers understand buyers’ perspectives on their offers.
  • Brokers help sellers evaluate offers and strategize on options to respond.
  • Brokers act as intermediaries throughout the negotiation process. Brokers can act as a “sounding board” for each party and/or play “good cop/bad cop” on behalf of sellers.
  • Brokers can help revive near-death deals. In offer negotiations, it seems most transactions “die” at least once before they are Lazarus-like revived.

Benefits - due diligence stage

  • Brokers help sellers prepare for and respond to due diligence requests.
  • Brokers help coordinate the due diligence process, including coordination with outside advisors.
  • Brokers help address and resolve buyer …