Untitled Document
 

 

 

 

Business Broker Basics

What is a Business Broker ?

A Business Broker (or Business Transfer Agent) is the Facilitator of the Transfer in Ownership of a Business.

In addition to helping you negotiate the actual sales transaction, business brokers have a wealth of contacts and resources at their disposal, and they should be able to provide you with additional value by making discreet inquiries to potential buyers. Brokers will have contacts at larger corporations that may be interested in buying your business, often at a higher price than an independent buyer would be willing to pay.

What does a Business Broker do ?
A Business Broker will complete the following;

 

Pre-Sales Audit - An audit into the current 'saleability' and market value of the business

Marketing: Preparation of memorandum of sale, marketing the business, screening & qualifying potential buyers, preparation of closing documents. Liaison with professional advisors.

Negotiations: Working with potential buyers, creative structuring and bartering sometimes complex deals, presenting offers, evaluating offers, communication channel, maintaining relationships.

Closure: Documenting summary of deal, controlling professional advisors, formal completion, communication of the sale to all stakeholders

Click here to more information on what a business broker would do for me.

How does a Broker bring Buyers and Sellers together?
To market a business the Buyer and Seller must be brought together under favorable conditions. To accomplish this, Buyer and Seller profiles are developed with limited information sufficient to undertake a matching process.

When the Buyer and Seller appear compatible, the Buyer is encouraged to learn more about the business by being provided with additional information. After additional information sufficiently peeks the Buyer’s interest, a time to visit the business and meet the owner is then arranged.

How is the value of a business worked out ?
BizSale professionals are trained to evaluate businesses using a variety of techniques. We can meet with you to review the facts that will help you determine a price that is fair to you, while being attractive to a potential buyer. A determination of market value by Bizsales gives assurance that the offering price is based on knowledge of the current marketplace. Click here for More on Valuations.

Estate Agent 'v' Business Broker
Estate Agents will sometimes handle the sale of primarily property based & local businesses; but not the going concern. The price raised by an estate agent, will be based primarily on the value of the property, with the resident business seen as an extra to the sale. A Business Broker however concentrates on the whole value of the business, valuing the property on the balance sheet of the business, thus normally realising a higher price for the whole entity. It is also not unknown for a broker to separately sell the two entities (i) the business (ii) the property, sometimes to different people, raising a higher price for the vendor.

A business sale is very different from a property sale. Most estate agents do not have the training, experience, or understanding to value or sell your business the right way. Consider some of the differences—

The sale of a business is characterized by:

  • a confidential process
  • value based on cash flow
  • few comparable's available
  • a complex transaction

On the other hand, a property sale is characterized by:

  • a public process
  • value based on real property
  • many comparable's available
  • a simple process

Would-be business sellers are often reminded that if they wanted a “FOR SALE” sign posted out front and their financial statements posted in the window and published on the Multiple Listing Service, then a estate agent would work just fine! If you want to keep the sale of your business confidential while still maximizing your exposure to potential buyers, then see a business broker. BizSales Business Brokers specializes in business sales and in business property sales that are associated with business sales. Click here to more information on what a estate agent would do for me.

Why not sell it yourself?
Because you’re at a disadvantage. It takes owners several years to successfully sell their businesses on their own and often at a drastically lower price than could have been achieved. In addition, the distraction of selling their business on their own actually causes the value of the business to drop as the owner is distracted from the day-to-day operations. You as the owner should focus on what you do best—running your business. Let us focus on selling your business. We do the analysis to show you what your business is worth; we prepare the business presentations to show prospective buyers; we advertise and market your business to buyers and qualify them before interrupting your work. Our professional efforts allow you to continue to grow your business and maximize its value. Click here to more information on DIY selling of your own business.

How does a Broker charge for their services ?
A Broker will charge fees for their services. These will either be a fixed amount or a scale charge based on the complexity of the deal, the amount of work required. the vendor pays the broker between 5-10% of the final sale price, payable at the close of the deal. This rate can vary depending on the size and complexity of the business, and the amount of work required to sell it. Be sure to ask a broker up front if there are any fixed fees involved in the transaction or if you are responsible for any other expenses incurred by the broker.

 

Pre-Sales Audit: For preparation of audit of the business, it's salability and the changes recommended to increase it's value

Documentation (or Marketing) Fee: For preparation of confidentiality agreements, the memorandum of sale, the draft sales contract, and any and all supporting documentation to facilitate the sale. It does not include the preparation of any legal or financial material that would reasonably be expected to be in place. It does not include any advertising, which is normally charged on at cost.

Valuation Fee: For valuation reports prepared by the broker and/or third-party experts.

Completion (or Success) Fee: Between 5-10% of the net value of a deal resulting in the successful transfer of business ownership from a buyer to a seller, usually subject to a minimum fee.

Click here to check BizSale's fees