A Business Broker’s Role in a Business Sale

The decision to sell a business is often difficult. For some people, it’s motivated by a sense of boredom and a desire to move on to other things. For others, family responsibilities get in the way, or retirement has begun to look more appealing every day. No matter why people decide to sell, they need the help of a qualified business broker.

Business owners may be hesitant to hire a broker from the beginning because they are nervous about paying the associated fees. What they don’t realize is how crucial these professionals are to the processes of preparing the business, finding a buyer, and closing the deal. Many sellers don’t know what to expect when working with a business broker.

Preparing for the Sale

A business broker’s work begins before the company is put up for sale. These professionals first conduct full assessments of their clients’ businesses, collect financials and relevant information, and recommend appropriate selling price ranges. Business owners should seek out brokers well in advance of their intended sale date because this stage can also involve finding ways to resolve any shortfalls identified by the broker to increase potential profits.

Business brokers can also leverage the power of their professional networks to help their clients. They know which financial professionals to call for a formal valuation, what lawyers to consult regarding both contracts and potential liability issues, and when to seek the help of attorneys and financial professionals.

Finding Qualified Buyers

Business brokers also make it their job to find qualified buyers, which often involves putting together marketing packages that target specific market segments and clarify the company’s key value propositions. Brokers also develop a Confidential Information Memorandum (CIM) and blind profile for each business they represent, which is particularly important if part of the company’s value rests on its ability to maintain trade secrets.

Once potential buyers start to express interest, brokers prequalify them before introducing them to a seller. This allows brokers to get an idea of not just whether the buyer can afford to purchase the business but also whether they have any relevant background and experience and when they want to close the deal.

Closing the Deal

Brokers are highly experienced at closing business deals. They can assist in evaluating buyers’ proposals, facilitate negotiations, and help to ensure the transaction is structured properly. The business broker manages buyer/seller meetings up until the closing date.

Understanding Commissions

Business brokers usually get paid a commission of around 10% by the seller, as would be the case in a regular real estate transaction. The commission will be due at closing. If the brokerage charged upfront fees to cover expenses, they’ll usually be deducted from the commission at closing.

Hiring a Broker Is Worth the Commission Fee

Unless a business owner already knows the buyer well, finds them to be trustworthy, and has enough time to manage the particulars of the sale while simultaneously continuing normal business operations, brokers are essential. Businesses sold by qualified brokerages tend to have higher selling prices while business owners can focus on maintaining core operations and preparing for their new lives post-sale. Brokers save clients money in the long run and also ensure everything is handled appropriately during the sale process.