The vast majority of business owners work for years to build their organization, but they will need to sell that business eventually. When that time arrives, most owners look for ways to guarantee the highest net when finalizing the sale. One way to cut selling costs is to market the business without the help of a business broker. However, is selling without professional guidance a good idea? What benefits does a business broker bring to the table?
Is a Business Broker’s Help Always Needed?
There may be some specific situations when using a business broker may not be needed. For example, an owner may sell a business to a relative or someone else close to them. However, there will still be risks involved even when the purchaser is close to the seller. A business broker can make the process flow smoothly and provide guidance, so important steps are not overlooked. It’s a good idea to discuss this type of sale with a business broker to understand how their help may be beneficial.
Establishing a Selling Price
When marketing a business, one of the first concerns is properly determining its value. In some cases, that may seem relatively easy, as there may be similar businesses in the area that are for sale or have recently sold. However, evaluating a business and establishing a price isn’t as simple as it might seem.
First, even if another business may appear, on the surface, to be similar, there are almost always factors that are not obvious. For example, another business may have many customers, while another may have just a few, large customers, which radically alters the valuation. In other instances, the comparable business might be including extra inventory or even real estate that also merits consideration.
It takes a professional to properly evaluate a business’s value. Even a minor error during the process can lead to a seller not obtaining the net they are entitled to. Business brokers encourage clients to take all the time needed to properly set up the business for sale in the most attractive way to buyers. This will likely take some time. Brokers encourage sellers to talk to a business broker well in advance of any sale. Doing so can make a major difference in the net price.
Developing a Marketing Plan
While a business owner may be an industry leader in their niche, it’s rare for an owner to know how to properly market a business. That’s because there are multiple avenues to explore when deciding which steps to take during the marketing process.
Since every business is, to some degree, unique, there is no one-size-fits-all marketing strategy that will work. While some basic ideas may be routinely used for most businesses, every marketing plan should be customized to match the company being sold.
In addition, the entire concept of marketing is evolving. Today, online marketing is more important than ever. That’s partially due to changes in society, but the newest wrinkle is the pandemic. Strategies that worked well in the past may not be successful now, as the way people shop for a business is no longer the same.
Business brokers stay on top of the latest trends and track how buyers look for a business opportunity. Not many business owners have that type of expertise, which means they will be at a disadvantage when it’s time to sell if a broker isn’t involved in the sale.
In rare cases, confidentiality isn’t a major issue. The business owner wants the company sold and is perfectly comfortable letting anyone know it is on the market. However, the majority of the time, owners don’t want the general public, competitors, or even employees, to know the business is for sale. Business brokers work with sellers to determine how to market the business without everyone being aware of the potential sale.
A good example is a company in a highly competitive industry that could lose bids if a pending sale was general knowledge. If the business is being sold as an ongoing entity, it’s important to minimize any risk of lost business due to a sale, and that certainly includes future business.
In some instances, key employees may choose to immediately leave if they think their position would be jeopardized by a sale. Rather than taking that risk, an employer may choose to keep a potential sale confidential until the last minute. That’s especially true when retaining key employees would benefit the sale.
In other cases, a business owner may share the plan to sell a business with the understanding the jobs of key employees would be protected. That would entail letting those employees know what was happening and keeping them in the loop throughout the sales process.
The key here is to work with a business broker to make sure the best interests of the company are protected during the sales process. It’s far easier to determine how to maintain the correct level of confidentiality when working with an experienced broker.
Understanding the Negotiating Process
Even though a business owner may have negotiated countless sales over their career, negotiating the sale of their business is entirely different. Not only are the stakes higher, but owners tend to make decisions based on emotions, rather than facts, during the sales process. That can mean losing a sale or reducing the net profits.
A business broker isn’t emotionally attached to a business. They can be pragmatic when approaching the sale rather than making decisions based solely on emotions. Brokers also understand the formalities involved with the sales process and will ensure no steps are missed. Owners rarely have the skill set needed to move smoothly through all the steps in selling a business.
Protecting Your Interests
Business brokers provide a level of protection for sellers. They understand the steps required to complete the sale and take precautions to ensure no surprises threaten the sale. While legal advice is recommended, an expert business broker will know the major deal terms and what is considered “market”.
If you’re considering selling your business in the near future, now is the time to contact a business broker to start the process. It takes time to develop a marketing plan, and getting advice now rather than at the last minute is always preferred.