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What is a business broker? And what you should expect when working with one.

A business broker is a professional who assists in the buying and selling of businesses, helping to connect buyers and sellers while also acting as an intermediary throughout the process.

They have a thorough understanding of the process. Brokers work with the small business owner to complete the sale successfully while maintaining confidentiality throughout the process.

Selling a business is a long and difficult process. It will usually take 9-12 months, or even longer, depending on the industry and specific business.

A broker will leverage their expertise. They have specialized knowledge of many aspects of a transaction to help with a smooth sales process.

Here are some aspects a business broker will assist within a business sales transaction.

Prepping for sale – Only 25% of businesses that are listed for sale will eventually sell. There are several factors impacting this. Business brokers find that owners who start planning their sale 3+ years out have a much higher success rate than the industry average.
READ 10 Tips to Get Your Business Ready to sell

Business valuation – Another reason many businesses go unsold is unrealistic owner expectations. Business brokers can assist sellers with a business valuation based on relevant comps and market trends. This unbiased valuation enables the broker to set an initial asking price and negotiate the best price for the seller with prospective buyers.

Preparing a marketing package – Brokers market your business and attract qualified buyers – even while keeping it confidential. After screening a buyer prospect and obtaining an NDA. A broker will provide a Confidential Information Memorandum (CIM), which includes details about the business’s products, financials, customers, real estate holdings, and other relevant information for prospective buyers.

A broker will use online platforms, such as BizQuest & BizBuySell, to market to sellers. Brokers will also conduct an advanced search to help find potential buyers.

Buyer Search & Screening

Find Buyers While Protecting Confidentiality – Brokers market your business and attract qualified buyers – even while keeping it confidential.

Access to buyers – Business owners benefit from the brokers’ extensive network and prior experience with business sales to quickly connect parties interested in a business sale.

Marketing for multiple clients compounds the effectiveness for each.  A coordinated and ongoing campaign to sell many businesses attracts the largest possible pool of potential buyer prospects. One buyer is no buyer.

Managing the process

A professional broker will manage the process to reduce distraction for the owner from the noise of the transaction. Allow the Business Owner to Focus on Running the Business

The process has many moving parts, and a broker will focus on moving the process forward. Here is a snippet of the many activities: Answering buyer questions, assist in evaluating buyer proposals, providing/updating paperwork, negotiations, and structuring of a potential transaction.

Coordinating the Closing & Owner Exit

Experienced brokers have completed deals and have pre-made legal documents available, as well as relationships with professionals such as transaction attorneys and accountants.

An important connection is a broker’s access to lender partners. Brokers work with lenders to ensure the buyer has the financial stability to take on loans from the Small Business Administration (SBA) or other forms of financing. They also help set the financing terms, such as leasing, seller financing, franchise opportunities, and escrow.

Once the terms of the sale are set, a business broker works with the seller to organize the transition. They’ll help the new owner acquire the company as smoothly as possible, including transitioning company leadership, setting an exit date, and organizing training for the new business owners.

Business Broker Commission (Success Fee)

Business sales can often take 12 months or more. Brokers will often require a retainer to start the process. Brokers are primarily compensated by a successful transaction, paid by a success fee (also known as a commission), which is based on a percentage of the sale price of the business.

Typically, a broker works on commission, receiving 10%-15% of the final sale price. As the selling price goes up, the fee percentage tends to go down.

What Can Be Lost by Not Using a Business Broker

Some business owners will go the route of For Sale by Owner. This can be a risky choice. If confidentiality is a concern, it will be hard to market and communicate with buyer prospects while maintaining confidentiality.

Also, the process can be long and consuming. Often becoming a distraction to the seller that can negatively impact their business. If business sales and revenue are dropping, a buyer is going to be hesitant.

A business broker can help a seller with the paperwork and legalities involved in selling a business. This includes preparing and filing the necessary paperwork, as well as working with the buyer to ensure a smooth transition.

Ultimately a broker can help a buyer get the best price for a business because of their experience in the field. Also considering only about 25% of businesses for sale actually sell. Paying a 10% commission on a successful sale outweighs no sale at all.

Learn More with a Free Consultation

To help you learn more. You can schedule a discovery call with me. There is no obligation, and it is confidential. Your call is an opportunity for a quick meet and greet. I would love to hear about your business journey, and we can go over any questions about exit planning, business valuations, and buying/selling a business.

Also, I can lay out what the path of selling your business looks like for you. Information that you can use to make when you decide to sell much easier and more profitable.

To Learn More:
Reach Ben Shaw directly at 937-623-8571
or by email b.shaw@murphybusiness.com