Selling Your Business? Why To Use a Business Broker
Making Your Company More Valuable and More Salable!
They say timing is everything, for a business owner the horizon to sell always seems to be 5 - 10 years away and as a broker, I hear that all the time. One reality though seems common - most owners decide to sell their business, not within years or months, but within weeks, if not days. Are you prepared? How will you work through the long and demanding process of selling your company? Successfully...?
from: Rex Rossi and howtosellmybusiness.com: A Chicago based, Business Broker group and M&A information website dedicated to helping lower middle market and "Main Street" privately held companies improve the value of and achieve - the successful selling of their businesses.
The Who, How and Why to Work With a Business Broker
In today’s marketplace, 80% of all businesses for sale are "for sale" by owner (“FSBO”). Coincidentally, four out of five businesses on the market never get sold! Does that mean that FSBOs never sell? Or, do only the businesses represented by Brokers sell? (Well, truth be told, those don’t always sell either.)
Do you think there's a correlation between the low percentage of businesses for sale that are represented by professionals (20%) - and the high percentage (80%) of all businesses listed that are NOT sold?
What happens to all those businesses that don’t get sold?
They close!
Often, the seller just waited too long (sometimes a few years, or a few months) before placing the business up for sale. Unfortunately, the most valuable asset developed in an owner's professional life suddenly disappears. A career's work evaporates and in the end, a forced effort at selling is just one last attempt to salvage something from a bad, perhaps financially hemorrhaging, situation.
And for others, as time passes, the enthusiasm and energy that built the company dissipates and with that lack of enthusiasm your business deteriorates, perhaps to the point that it seriously affects the entity's value. Suddenly, what you hoped for and planned for, as an exit and value strategy, deteriorates or collapses, (see Preparing a Business for Sale - Does Not Mean Up for Sale!) sometimes leaving an owner where they first started - with nothing or next to nothing - and 'brobdingnagian' dreams.
An Owner's Most Important Financial Decision
For many business owners, selling their business is the most important financial decision and most consequential "liquidity event" of their life.
When you're the subject of an IRS audit do you manage it yourself or seek an accountant? When you have a legal problem, do you attempt to navigate it as you go, or seek the advice of an attorney? So, when one of the most important financial decisions and transactions of your life takes place, do you hope for the best and proceed with your instincts, never knowing or understanding the real value and total marketability of your business?
This is why engaging an experienced Broker is important and valuable during the transactional lifecycle.
A singular Business Broker objectively knows the market, what the market is looking for and what it will pay! Most importantly for an owner - a broker gets the deal done!
What Does a Business Broker Actually Do?
Every owner thinks or says out loud to him/herself, What does the Business Broker actually do?
The simple answer is:
An exceptional Business Broker expertly prepares you and your company for the divestiture process by making your business more presentable, desirable, marketable, and financeable. The bottom line - the business now becomes more valuable!
The Broker knows who your buyer may be, where and how to find them and how much the buyer will pay. He/she understands what is valuable and what is not – to the buyer!
The Business Broker is the intermediary between potential buyers, their advisors and the seller that dispassionately facilitates the exchange of information and moves the process of divestiture forward to a successful conclusion.
Many owners often say “I know a competitor who will be interested,” or “what’s his name will buy this immediately”. Just remember, competitors and/or family members or employees often pay the least. That's right - the least! They already know your business, your customers, your market and your flaws, so why pay you? With a business's family members, or sometimes it's employees, they envision "a home team discount."
A skilled business broker will try to create an audience, an engaged market with various buyers. You achieve the most successful transaction when there is an open, multiple participant audience rather than a single buyer's bid.
That’s one advantage the Business Broker brings - an understanding of the market, the universe of potential buyers and the ability to indirectly create a buyer's tension between participants which usually leads to the best pricing, terms and conditions which meet and often exceed the seller's ultimate goals.
Keep in mind, the highest price offered doesn't always translate to the most successful deal for the seller. Sellers have many goals, dreams and ideas for a successful outcome. An exceptional Business Broker listens, understands and subtlety expresses these views to a buyer. He/she creates an atmosphere for all the participants to successfully complete the deal.
An effective and valuable Business Broker is someone who will become indispensable to successfully selling your business - to both - the owner and the buyer.
A Seller's Strategic Transactional Advantage Having an Experienced Business Broker
The Broker's breadth and depth of industry knowledge provides you with some very important strategic transactional advantages:
- Knowledge as to how to make your business more valuable.
- Access to many means and methods for marketing your business.
- An understanding of how to prepare a business for financing with multiple banks and lending facilities.
- Knowing how to confidentially offer and introduce your business to the market, while maintaining complete confidentiality with your employees, vendors, bankers, customers and business associates.
- Understanding the arduous sales process known as the "transaction lifecycle" with all of it's moving parts, participants and possible outcomes.
- Acting as a confidant, advisor and the business’s chief public advocate. Personally counseling the owner through each transactional step and confronting together with the seller and advisors all of the process's emotional and psychological ups-and-downs.
- Trust and honesty: Someone who will look after the seller's best interests. A tireless guide who will honestly represent the "business" and the owner - to achieve all, or as many, of the seller's ultimate goals.
- Transparency: An outstanding Broker will say what he means, mean what he says and … will do it! And if he can’t, for whatever reason, he will call you (the seller) and/or the buyer, to keep everyone abreast of the situation throughout the stages of selling your business.
- Finally, a successful Business Broker will establish a cadence, a rhythm for all the deal participants to follow. Time becomes the enemy of all transactions. Delays frustrate and angers both a buyer and a seller. One important purpose of the intermediary is keeping everyone focused and moving forward so that - yes, eventually - the deal will get done...successfully!
A Concluding Comment For the Business Owner:
Seriously, take this to heart Mr./Ms. Owner, - regardless of how good the Business Broker is, more often than not;
The way business owners present themselves to a buyer is critical to successfully completing a deal. How an owner talks to a buyer, the tenor and tone of their voice, the comportment and overall physical presentation to a buyer will be the one last impression necessary to put the deal over the goal line.
From that very first meeting between the buyer and a seller, the seller is continually being evaluated and judged by the buyer and his/her advisors.
It's about trust and establishing a comfort level between the buyer and the seller. The buyer wants to feel everything presented is accurate and truthful, and to feel comfortable with everything and everyone, including you, the seller. When that happens - you usually have a deal!
The bottom line here is, you - Mr./Ms. business owner - will become the closer... just by being yourself.
If you would like help, more information or just have questions on how your business compares in today's market - feel free to reach out, call or email - on how to market and successfully sell your business, or visit: www.howtosellmybusiness.com.
Or please contact directly:
Rex Rossi
rrossi@teampremier.com | 708.433.9410
rexrossi@howtosellmybusiness.com | 708.433.9410
Founder and Executive Director - howtosellmybusiness.com
Senior Business Broker and Exit Planning Consultant: Premier Business Group, Ltd.
Preeminent M & A Specialist to Privately Held Companies: Manufacturing, Distribution and Service Companies in the Chicagoland, Midwest and national markets.
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