Why Use a Business Broker

Business brokers bring a very special additive to the selling of your business. Whilst some business owners feel that they can sell their business themselves and will simply just place an ad in the newspaper and wait for the telephone to ring. They think of the money they can save by not paying a broker's fee. This modus operandi very seldom works! It can become a very expensive exercise because firstly, the telephone may not ring. The calls could be the local competition attempting to find out what is for sale and for how much. Those who may be interested could visit the business, ask questions and then leave, never come back and gone is the confidentiality, proper pricing, qualifying the prospects, and finding the right buyer.

Business brokers do, however, market the business so it is shown only to qualified and interested buyers. Very few buyer prospects really know what kind of business they want, or what best fits their needs. In fact, 90 percent of all buyers are considering buying a business for the first time, and are open to all suggestions. A business broker can supply many prospective buyers with the attributes of your business that you or the buyer could not find on their own.

Very few sellers price their business properly. A business broker has a handle on the local marketplace, access to market data, and pricing information not available to a seller. Business brokers are also good sources of outside financing, if available. In some cases, the full sale price is not the issue, but rather how the sale is structured.

Business brokers generally have a backlog of buyers that they work with on a current basis. They prepare a business profile on the businesses they represent, designed to show the business in its best light. They know how and when to advertise, when to use trade publications, how to use the Internet, and how to qualify buyers. Business brokers can maximize the price of a business and create added value so that their fee is generally a non-issue. Sellers usually receive a higher price when working with a business broker, even after the fee, than they would if selling the business on their own and it almost always pays to use a professional.

Adding Value to Your Business

If you are considering selling your business, remember that there are positive factors that influence value and those that detract from it. Looking at your business from a buyer's perspective is important since a prudent buyer will be adding and subtracting these various factors when arriving at an asking price. It is perhaps more important to recognize when the buyer arrives at a price at which he or she will leave the negotiations. Buyers naturally try to buy the business at the lowest possible price.  Most also have a top price over which they are probably not willing to go. Here are some of the "high value" indicators as well as some of the "low value" indicators to consider when evaluating your business.

Indications of High Value

·       High sustainable cash flow
·       Room for the business to grow
·       Anticipated industry growth
·       Competitive advantage - location, area, etc.
·       Business niche
·       History and reputation
·       Low failure rate in industry
·       Modern, well maintained facility

Indications of Low Value

·       Customer concentration on a few major customers/clients
·       Reliance on owner
·       Poor financials
·       Distressed circumstances
·       Few assets
·       Product or service sensitivity
·       Poor outlook for industry - regulations, foreign competition, price cutting, and discount stores, etc.

Considering the above factors and how to address them can help a seller look at the business through the eyes of a potential buyer. A professional business broker can help the business owner sort through the many areas that buyers consider when looking at a business and trying to arrive at an initial offering price.