10 Reasons to Use a Business Broker

10 Reasons to Use a Business Broker

Jan 10 2017

A qualified business broker is a professional intermediary who helps small business owners sell their companies. The broker provides a buffer between buyer and seller, using his or her expertise to help owners obtain the best price for their business. A broker protects your interests, files paperwork, and acts as a liaison between insurance agents, bankers and other professionals involved in the sale. Here are some other reasons you can benefit from hiring a business broker.

 1)      Confidentiality

You can’t sell your business unless you present pertinent information to prospective buyers. At the same time, you don’t want to reveal too much, or have that information get into the wrong hands. A business broker knows how to effectively advertise your business for sale without revealing your identity. They can pre-qualify buyers before you reveal specific information about your business, and create a confidential response system for ad inquiries and sales initial meetings.  

A business broker will draft a confidentiality agreement (also called a non-disclosure agreement) to protect your interests. This is a legal contract designed to keep sensitive information you share with prospective buyers secret. If the prospect violates the confidentiality agreement, you can take legal action.

 2)      Better Preparation for a Trouble-Free Sale

Your broker analyzes company finances to give you an accurate portrayal of your cash flow. Buyers are interested in profitability. If you can’t demonstrate the true worth of your business, the buyer may go elsewhere. A broker will let you know if your company could use financial improvement before putting it on the market, and suggest ways to achieve it. 

3)      Locating and Screening Buyers

Brokers with years of experience have dealt with many types of buyers and situations. They can spot qualified buyers, poor prospects and frauds without much effort. Without experience contacting and working with buyers, it’s hard to know where to find the right ones for your business-and what to ask them. A broker knows where to list your business and the best questions to ask to qualify prospects.

4)      Coordinating the Due Diligence Process

The last stage of the selling process, due diligence occurs after buyer and seller have signed a purchase contract. As the seller, you’ll need to prove your description of your company’s finances is complete and accurate. A business broker checks all your supporting financial documents for errors. These documents include, but are not limited to, balance sheets, income statements, tax returns, bank statements and inventory reports. When all financial and supporting documents are in order, due diligence - and closing – run smoothly for everyone involved.

5)      Negotiation Support

Business owners attempting to sell a company without a broker’s help may grow impatient and accept a weak offer when the business has been on the market for awhile. A business broker helps you avoid this through the preparation and screening process, and assists in negotiations to get your asking price or more.

6)      Marketing

Highlighting business strengths during the sales process is important to attract the best buyer – and the best price. A broker knows how to showcase your business with a distinctive presentation and answer the prospect’s questions without revealing company secrets.  

7)      Experience

A seasoned broker will lead you through each step of the sales process, from placing an ad to sell your business to closing the deal. Their accumulated knowledge help you avoid pitfalls that may cause complications after the fact.

8)      Financial Valuation

Setting the appropriate sales price will attract an ideal buyer. Underprice it and you’ll cheat yourself; overprice it and may not receive any inquires. A business broker has experience determining the best price for your company by using business transaction listings and interpreting current market trends.

9)      Handles the Deal-Making Process While You Run Your Business

You still need to run your business during the sales process, and hiring a broker allows you to spend most of your time doing this. The broker handles the marketing and screening process, and assists you during prospect interviews, negotiations, sale agreement and closing. This takes the pressure off you and lets you concentrate on keeping business performance and employee morale high. Buyers will be more apt to pay your advertised price if they have proof your business is productive and profitable during negotiations. 

10)  Helps Buyers Obtain Financing

The easier it is for a qualified buyer to obtain financing, the easier it will be for you to get top dollar for your business. Brokers often work with lenders to approve loans for buyers. They can also guide buyers to other sources of cash, including retirement accounts and peer-to-peer lending networks. 

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