What are the benefits of using a broker to sell my business?
Confidentiality. A business broker will protect the identity of the company and contact only owner approved buyers through a blind profile – a document describing the company without revealing its identity.
Business Continuity. Selling a business is time-consuming for an owner, and with a business broker, the owner can maintain a focus on running the business when a broker is working on the sale.
Reaching potential buyers. Business brokers have the tools and resources to reach the largest possible base of buyers.
Marketing. A business broker can help present your company in the best light to maximize the sale price. He or she has an understanding of the key values that buyers are looking for and can assist in identifying changes that can lead to a better selling price.
Valuing your Business. Putting a value on a business is far more difficult and complex than valuing a house. Every business is different, with hundreds of variables that have an impact on the value. Business brokers have access to business transaction databases that can be used as guidelines or reference points. But the best way for a business owner to truly feel comfortable that he got the best deal is to have several financially viable parties bidding for his business, which is much more likely using the resources of a professional business broker.
Balance of Experience. Most corporate buyers have acquired multiple businesses while sellers usually have only one sale. An experience business broker can level the playing field for a business owner making his one and only business sale.
Closing a Deal. Since the business broker’s sole function is to sell the business, there’s a much better chance that a deal will be closed in less time. The faster the sale, the lower the risk of employee problems, customer defection and predatory competition.
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How Does Your Business Compare?
When considering the value of your company, there are basic value drivers. While it is difficult to place a specific value on them, one can take a look and make a “ballpark” judgment on each. How does your company look?
| Value Driver | Low | Medium | High |
|---|---|---|---|
| Business Type | Little Demand | Some Demand | High Demand |
| Business Growth | Low | Steady | High & Steady |
| Market Share | Small | Steady Growth | Large & Growing |
| Profits | Unsteady | Consistent | Good & Steady |
| Management | Under Staffed | Okay | Above Average |
| Financials | Compiled | Reviewed | Audited |
| Customer Base | Not Steady | Fairly Steady | Wide & Growing |
| Litigation | Some | Occasionally | None in Years |
| Sales | No Growth | Some Growth | Good Growth |
| Industry Trend | Okay | Some Growth | Good Growth |
The possible value drivers are almost endless, but a close look at the ones above should give you some idea of where your business stands. Don’t just compare against businesses in general, but specifically consider the competition.
As part of your overall exit strategy, what can you do to improve your company?
© Copyright 2015 Business Brokerage Press, Inc.
Photo Credit: kconnors via morgueFile
How Does Your Business Compare?
When considering the value of your company, there are basic value drivers. While it is difficult to place a specific value on them, one can take a look and make a “ballpark” judgment on each. How does your company look?
| Value Driver | Low | Medium | High |
|---|---|---|---|
| Business Type | Little Demand | Some Demand | High Demand |
| Business Growth | Low | Steady | High & Steady |
| Market Share | Small | Steady Growth | Large & Growing |
| Profits | Unsteady | Consistent | Good & Steady |
| Management | Under Staffed | Okay | Above Average |
| Financials | Compiled | Reviewed | Audited |
| Customer Base | Not Steady | Fairly Steady | Wide & Growing |
| Litigation | Some | Occasionally | None in Years |
| Sales | No Growth | Some Growth | Good Growth |
| Industry Trend | Okay | Some Growth | Good Growth |
The possible value drivers are almost endless, but a close look at the ones above should give you some idea of where your business stands. Don’t just compare against businesses in general, but specifically consider the competition.
As part of your overall exit strategy, what can you do to improve your company?
© Copyright 2015 Business Brokerage Press, Inc.
Photo Credit: kconnors via morgueFile
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The Confidentiality Agreement
When considering selling their companies, many owners become paranoid regarding the issue of confidentiality. They don’t want anyone to know the company is for sale, but at the same time, they want the highest price possible in the shortest period of time. This means, of course, that the company must be presented to quite a few prospects to accomplish this. A business cannot be sold in a vacuum.
The following are some of the questions that a seller should expect a confidentiality agreement to cover:
- What type of information can and can not be disclosed?
- Are the negotiations open or secret?
- What is the time frame for which the agreement is binding? The seller should seek a permanently binding agreement.
- What is the patent right protection in the event the buyer, for example, learns about inventions when checking out the operation?
- Which state’s laws will apply to the agreement if the other party is based in a different state? Where will disputes be heard?
- What recourse do you have if the agreement is breached?
Obviously, executing an agreement does not mean a violation can’t occur, but it does mean that all the parties understand the severity of a breach and the importance, in this case, of confidentiality.
While no one can guarantee confidentiality, professional intermediaries are experienced in dealing with this issue. They are in a position to understand the extreme importance of confidentiality in business transactions as well as the devastating results of a breach in confidentiality. A professional intermediary will require all legitimate prospects to execute a confidentiality agreement.
A confidentiality agreement is a legally binding contract, enforceable in a court of law. It establishes “common ground” between the seller, who wants the agreement to be extensive, and the buyer, who wants as few restrictions as possible. It allows the seller to share confidential information with a prospective buyer or a business broker for evaluative purposes only. This means that the buyer or broker promises not to share the information with third parties. If a confidentiality agreement is broken, the injured party can claim a breach of contract and seek damages.
© Copyright 2015 Business Brokerage Press, Inc.
Photo Credit: pippalou via morgueFile
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