6 Types of Information Your Business Brokers Need From You
Want to sell your business? Do you feel like it’s time to hang it up and move on to something else? Whatever your reason for wanting to sell, a business broker should be at the top of your list of calls to make.
But before interviewing business brokers, you have homework to do: gathering and organizing everything a potential buyer will want to know about your business. Buyers want clear data that will convince them your business will be profitable after you’re gone.
So if you’re looking for a smooth sale at the highest price possible, you will want to prepare the right paperwork and packaging documents ahead of time. Here are six key types of information business brokers like Sunbelt Business Brokers need to set you up for success:
1. Organized Financial Statements
If you haven’t been good about record keeping, start with organizing your financial statements first. You may want to bring in a certified public accountant if necessary. It may save you time and add to the credibility of your financial documents.
You will need the following documents:
Tax Returns: For two to three years, five would be better
Profit and Loss Statements: For two to three years
Balance Sheet: A snapshot of the business’s assets and liabilities
Cash Flow Statement: A snapshot of how much cash you have on hand
A solid package showing your financials can signal to buyers that you’re serious about selling.
2. Your Reason for Selling
Are you ready to retire? Do you want to start another business? Do you think the market is hot for selling? Business brokers can direct their strategies and marketing according to your motivation for selling and your goal of when you want to sell.
3. What You Think Your Business Is Worth
The valuation of your business can be done in several ways. While your business brokers will handle this for you, having an initial estimate of how much you think your business is worth can give your business brokers an idea of your expectations. It can also help you gather the right documents to present to your business brokers.
You can start with Sunbelt Business Brokers’ free business valuation calculator.
4. The SWOT of Your Business
What are your company’s strengths, weaknesses, opportunities, and threats (SWOT)? Providing your business brokers with your evaluation of factors like the presence of loyal customers, environmental risks, innovation, and potential regulatory changes can go a long way in developing the right strategies for your business.
5. Operational Details of Your Business
The operational details of your business include:
The name and organizational structure
A customer list
A list of employees and their roles and responsibilities
Suppliers
Contracts
Licenses
Permits
Policies and procedures
Inventory
Equipment
Beyond the financial information, buyers will pay particular attention to how the company is run.
6. Other Notable Aspects of Your Business
You certainly want to place your company in the best light, but you also want to make a potential buyer aware of any issues that might create headwinds for the business.
Compile a record of any lawsuits that might impact your business, whether your company is involved or not. You also should provide records of any issues with employees or other human resources issues.
Setting Yourself Up to Win
Putting together these six types of information for your business brokers will show them you’re serious about selling your business. Together, you can set your company up to achieve the outcome you want.
Business Brokers Sell Your Business While You Focus on Operations
In most cases, a business broker is indispensable when you’re selling a company. That said, if you’ve never sold a business before, you might wonder what exactly it is that business brokers handle for you.
The truth is that selling a business is more complex than it looks, and by handling each step of the process, a business broker leaves you the time you need to focus on running your business. Here’s a look at what business brokers do for you behind the scenes.
They Give You a Precise Business Valuation
Business brokers are experts at what they do. They’re intimately familiar with businesses like yours and what they’re currently selling for, so they can create a business valuation that gets you maximum profit while remaining realistic.
They Find the Right Buyers
If you’ve never sold a business before, you might think it’s as simple as placing a listing and waiting for potential buyers to call. In reality, most business deals happen through networking. That’s something you could feasibly do yourself, but this kind of networking can be incredibly time-consuming — especially if you don’t already have promising business contacts.
Business brokers have pre-existing networks of buyers, and they also have the time to seek out new buyers if need be. That’s what they’re paid for! If you let a broker find your buyer, you’ll have more time to focus on the daily grind of running your business.
They Negotiate Deals
Once you find a buyer, you might think that the sales process is almost done. However, this is where it starts to get more complicated. Business brokers handle the back-and-forth between your business and the potential buyer.
Before closing, they generally negotiate a deal that ends up being mutually beneficial. Just like finding buyers, this is a time-intensive process that’s difficult to do when you’re also handling daily operations at your company.
They Keep Things Confidential
It might not seem like keeping a sale confidential has anything to do with running your business. However, if it becomes public knowledge that your company is for sale, that can adversely affect your business. Trying to handle problems that come from that public knowledge while managing the business and trying to sell it would be overwhelming for anyone!
Leave the Sales to the Experts
If you want to maximize your chances of getting a great sale price, you need to make sure your business continues to perform well while it’s on the market (and while you’re in the process of closing a deal). And if you’re the one in charge of running your business, it’s virtually impossible to handle every aspect of the sale yourself while also overseeing the business. Fortunately, there’s an easy solution. When you work with a business broker, you can outsource the marketing, interfacing with potential buyers, and negotiating to someone with experience. When you work together, you have a good chance of getting a fair price — or even better — for your business.
Is Your Business Suitable for Sale by Business Brokers?
Making the decision to sell your business is a big step. However, it’s the first in a line of many other major decisions. And in this case, the next decision is whether you should work with a business broker to find potential buyers and negotiate a fair deal structure.
Should you use business brokers to sell? Is your business one a broker would take on? Here’s a look at what factors to consider.
Is Your Business Successful?
Business brokers aren’t obligated to take on every single business they come across. There may be some who know buyers interested in buying and flipping failing businesses, but most people interested in buying a business want to make sure that it’s at least somewhat successful.
If you’re trying to sell a profitable business, there’s a good chance you can find a broker who will work with you.
Do You Have Experience Selling Businesses?
Business brokers essentially act as guides for business owners as they navigate the sales process. Unless you’ve sold businesses before, selling your business can be baffling and time-consuming. And if your buyer has a business broker, there’s a good chance you’ll get swindled. If you want the best possible price, it’s worth getting a broker.
Do You Have a Buyer in Mind?
When you work with a business broker, you’re not just paying for the broker — you’re paying for their network of eager buyers. In this situation, the broker’s fee is more than worth it, as you may not have even found a buyer otherwise.
However, if you already know who you’re selling the business to, you may not need a broker. A good example is if you’re passing your business down to your children. Because you don’t need a broker to find potential buyers and interface with them for you, it might not be necessary to hire one.
Are You Confident in Your Company’s Valuation?
It might seem like a small thing, but one of the most critical services business brokers offer is accurately determining your business’s value. Having a spot-on value is key before you start the sales process.
If you undervalue your business, you’ll potentially miss out on thousands of dollars you’d otherwise see. But if you overvalue it, potential buyers will turn away the second they see the price. Essentially, unless you have a highly accurate valuation already, hiring a business broker is a good idea.
Don’t Miss Out on the Benefits of a Business Broker
In most situations, business brokers can help you in your quest to sell your business at a profit. They can also help you ensure you don’t run afoul of tax laws when reporting the sale, and they can handle the time-consuming work of interfacing and negotiating with potential buyers.
Ultimately, the decision is up to you. Take a close look at your business, determine whether you know any potential buyers, and evaluate your own knowledge about selling a business. You might conclude that you’d benefit from the guidance of a business broker along the way.
6 Ways Business Brokers Can Save You Time and Net Higher Returns
If you’re fielding offers to buy your business or thinking about expanding by buying another business, consider hiring a business broker. Business brokers like Sunbelt Business Brokers can save you time and money by sorting through those offers or finding a business that fits your goals.
After all, you have a business to run. That business is the centerpiece of the deal and should be kept in peak shape to maximize its value and ensure that you have leverage in any transaction.
Business brokers have years of experience negotiating and executing the sales of various enterprises. They can handle your sale or purchase from beginning to end while guaranteeing that you comply with applicable state laws.
Here are half a dozen ways business brokers can save you time and net higher returns.
1. Making Connections
Business brokers have a vast array of business contacts and are intimately familiar with the environment businesses operate in. Having access to these buyers, investors, and others in your industry saves you valuable time and effort.
Through the network of buyers and sellers many business brokers maintain, they can quickly find a buyer or seller that fits your objectives.
2. Advising You Before You Go to Market
The experience business brokers bring to the table also enables them to clarify your objectives and goals or even help you find improvements in your operations that could increase the value of your business, making you better prepared to sell or buy.
3. Valuing Businesses
Among other things, your broker will take stock of your company’s sales figures and competitors, what’s going on in the industry, and what’s important about your market. This ensures that you know exactly how much to ask for your business or pay for another.
4. Marketing Your Business
Making sure buyers and sellers know that you’re looking to buy or sell is essential to the work of business brokers. They know the industry and will create the marketing materials needed to show your business in the best light.
By publishing information about your company, business brokers generate interest among buyers and sellers, helping push the value of your business higher.
5. Maintaining Confidentiality
Through the many years business brokers have handled deals, they know how to keep your business information private. They’ll screen buyers, require non-disclosure agreements (NDAs), and negotiate with discretion. All of this helps protect your business information, your employees, and your customers.
6. Coordinating Logistics
Many professionals will be involved in bringing the transaction to its ultimate close. Business brokers know which professionals are needed — financial advisors, accountants, lenders, attorneys, real estate brokers, and others — and will ensure that all the necessary players are in place to properly complete the deal.
The Advantages of Working With a Broker
Whether you’re looking to retire, move on to another venture, or expand your professional dealings, you naturally want to get the most out of selling your business or buying another one. A business broker can save you time and help you get the highest return possible for your business while you handle the important work of running it.
12 Questions to Ask Your Business Brokers During the Initial Consultation
After years of long days and full weeks of building your business, you’re ready to sell your prized possession or buy another business, and you know you need a business broker. You’ve done some research online and created a shortlist. But you don’t know the best questions to ask to get the best business brokers for your company.
Selling or buying a business likely is the most important decision you will make. You have just one chance to get it right. Screening business brokers and finding the one that best fits your objectives and goals should be uppermost in your mind.
You should make a list of at least three business brokers. Most business brokers do not charge for the initial consultation, so you can sit down with more than one separately, ask the same questions, and compare answers.
Here are 12 questions to ask your business brokers during the initial consultation.
12 Questions to Ask Business Brokers
Your initial consultation with business brokers should solicit enough information to feel comfortable that you’ve found a broker or firm of brokers who will have your best interests at heart. You will work closely with these business brokers for six months to a year, so you want to find someone you trust or believe will do the best job for you.
The following questions may not be all that you want to ask, but they can form a good foundation for finding the business brokers that will work for you:
How many years of experience do you have as a broker?
What types of deals have your business brokers worked on?
Have you worked to sell or buy businesses similar to mine?
What is your track record of successfully closing deals?
Do you have any testimonials or clients who can speak to your work?
Are you licensed to work in my jurisdiction?
How will you help me prepare my business for sale?
How will you value my business?
What is your process for finding potential buyers?
How will you help me negotiate the deal?
What is your process for closing the deal?
How much do you charge?
Business brokers should be able to easily answer these 12 questions to a level that helps you feel comfortable you’ve found the right ones. If not, move on to the next firm.
Your business is too important, and you’ve sacrificed too much to take a chance on business brokers you aren’t comfortable with.
Certification and Licensing
Like with some other professions, you might wonder about certifications and licensing. There is no national requirement to certify or license people to become business brokers.
However, the International Business Brokers Association recommends business brokers seek the group’s Certified Business Intermediary (CBI) designation to prove their expertise and professionalism.
In Florida, business brokers are required to obtain a real estate license to practice in the state.
Find Your Business Broker
Now that you know some questions to ask, you can create your list of business brokers. You can feel confident asking questions to reveal the right match to sell your business or locate a company to buy.
Business Brokers Can Expedite the Sale of your Commercial Business
You may be great at selling your goods or services, but selling your company requires a breadth and depth of skills only found with business brokers. If you’re looking to sell your commercial business and it needs to be done relatively quickly, a business broker is the professional to call.
Many commercial businesses take between four and twelve months to sell. The process — from deciding to sell to signing closing documents — involves dozens of factors and decisions. As a commercial business owner, you are focused on your customers and won’t have time to attend to the details of closing a commercial business sale quickly.
Here’s what business brokers can do for a commercial business owner:
Determine the value of the business
Prepare nondisclosure agreements
Market the sale
Screen potential buyers and schedule meetings
Assist with proposals, negotiations, and the structure of transactions
Professional brokers from Sunbelt Business Brokers are ready to take on these tasks, expediting the sale of your small or medium-sized business.
Getting Guidance From Experience
No one knows your commercial business better than you. But to sell your business — and fast — you need to know how the companies around you are faring, what your competitors are doing, and what kind of market there is for your goods and services.
Professional business brokers maintain a wide-ranging network of buyers, sellers, and other professionals. They can help you gather the information you need while they quickly get up to speed on your business, drawing on their skills and background in selling similar companies.
Business brokers are often called intermediaries because they are at the center of the sale. To succeed in this complex role, they must possess a wide range range of skills:
Business valuation
Business management
Corporate finance
Economics
Financial accounting
Industry knowledge
Law and licensing
Negotiation
Sales and marketing
This deep and wide experience helps set clear expectations from the outset, keeps the deal from running afoul of the law, and ensures there are no problems even after the closing. The value a good business broker brings to your deal will far outstrip what you pay.
Getting Maximum Value
Even though you want to sell your commercial business fast, there’s a long list of to-dos before that can happen. You must understand your assets and liabilities, have a firm grip on your financial statements, supply details on equipment, and compile files on customers, orders, contracts, insurance, and licenses.
With a business broker on board, you will not only cut down the time needed to gather and understand that information but will also have someone who can help you use it to establish the maximum value for your company.
Finding a Buyer
One of the greatest values business brokers will add to your deal is the list of potential buyers they maintain. Business brokers can help you value your company to seek the maximum price in the market, and they also can evaluate potential buyers, market your business, and negotiate for you — tasks that could take you months to complete on your own.
Through their experience and knowledge, business brokers offer the fastest path to selling your commercial business.
Do Business Brokers Charge a Commission or a Flat Fee?
Your business is humming along, and you’re thinking about selling it or buying another. Either way, you will need someone to help you find a buyer or seller and navigate state regulations, the valuation of your business, and tax implications. That person is a business broker.
While you know what business brokers can do for you, there’s one thing you might not have explored: Do business brokers charge a commission or a flat fee?
Most Business Brokers Charge a Commission
Instead of a flat fee, many business brokers work on commission, or a “success fee,” as it is known in the business broker world. It’s called this because you pay a percentage commission to the business broker only after the deal is successful. This fee structure is similar to working with a real estate agent, who gets paid at the closing of a sale.
The commission for business brokers is typically between 10% and 15%, depending on the price and size of the business. Generally, the smaller the sale or purchase, the higher the percentage commission; deals worth more than $1 million might see commissions slide toward the lower range of the scale.
Good business brokers should always work in your best interests, trying to get the most value they can for you. Working on commission can be an added incentive.
Some Business Brokers Charge a Flat Fee
Generally, a flat fee structure doesn’t give business brokers an incentive to increase the value of the transaction. But there are reasons business brokers might charge a flat fee.
Some business brokers charge a flat fee of $10,000 to $15,000 for sales and purchases of smaller businesses. These small businesses might generate around six figures in annual sales or less.
For businesses valued at less than $100,000, the flat fee might seem high, but the value of hiring a business broker — finding a buyer or seller, adding value to the business, and marketing the deal — might be worth it.
The opposite end of the spectrum is another time business brokers might charge a flat fee. Large, multimillion-dollar deals or transactions that take 12 months or longer might require a flat fee as a retainer.
Other Fees You Might Encounter
While typical commissions are around 10% to 15% and flat fees are often at least $15,000, there are no set prices for business brokers. You can negotiate the commission or flat fee.
One thing to keep in mind when researching business brokers is that you might be charged additional fees, even if you’re paying a commission. Business brokers handle a lot of tasks, and they might charge fees for some of those tasks in addition to their usual commission or flat fee. For example, a business broker might charge you additional fees related to legal work, accounting, and marketing. Whether you pay a commission or a flat fee, find out up front whether these additional fees or others are included in your payment agreement.
Top 4 Ways a Business Broker Benefits the Sale of a Business
You may have had friends or business contacts recommend that you use a business broker when selling your business. But few people know just what a broker can do unless they have direct experience with the profession. Here’s a look at some of the main ways a business broker can make things easier for you during the sales process.
1. You’ll Get a Quicker Sale
Most brokers maintain a list of active buyers looking to purchase a business as soon as possible. They also typically have contacts at banks, so if a buyer is ready to commit, the broker can likely help them secure financing.
As a result, when you work with a business broker, you’ll likely be able to make a sale much faster than if you were to go it alone.
2. You’ll Have a Guide Through the Process
From negotiating a deal structure to choosing the right attorney to assist with closing, completing a sale has many more steps than you might think.
You may be new to the ins and outs of selling a business, but it’s something business brokers deal with every day. A good broker will help you through the process and make sure you don’t miss any crucial steps.
3. You’ll (Probably) Get a Better Price
Because business brokers are often in contact with numerous would-be buyers, they can help you find and choose a buyer quickly. Having such an extensive selection of contacts also means they can usually get a better price for your business.
How? Business brokers almost always have multiple buyers interested in a single business, and they use that fact as leverage when communicating with potential buyers. While it’s not an auction per se, the buyers will often try to outbid one another for your business.
By contrast, it can be challenging to find just one interested, qualified buyer when selling your business on your own, let alone several.
4. You’ll Save Time
Many people who sell a business for the first time are surprised at how long it takes. Between marketing, meeting with potential buyers, negotiating deals, and moving through the closing process, selling your business leaves little time for anything else.
If you’re deeply involved in running your business, you may find it impossible to keep up with your typical duties while attempting to orchestrate a sale. Even if you aren’t involved in day-to-day operations, handling a sale yourself can be a massive investment of time and energy.
You still need to be somewhat involved in the process when you work with a broker. However, they can handle the responsibilities of marketing and interacting with buyers for you, leaving you free to run your business or pursue other interests.
The Right Broker Makes All the Difference
Selling a business is a complicated process, but skilled business brokers can help you navigate it. Of course, selling on your own is always an option. More often than not, however, working with a broker pays off — both financially and otherwise.
Is It Worth Contracting a Business Broker When I Sell My Company?
Selling your business is an exciting time, as it likely means you’re retiring or moving onto a new venture. All too often, though, making a sale is harder than it sounds.
Some business owners are determined to stick it out and make the sale alone. Others call in business brokers.
If you’re like many business owners who are preparing to sell, you might find yourself wondering whether contracting a business broker is worth the trouble. Here are a few questions to ask yourself as you make this key decision.
Do I Have a Buyer in Mind?
Many business owners who sell independently do so because they already have an interested buyer lined up. If you plan on selling your business to an employee or existing contact, you may not need to hire a broker — you can simply work out the details with your buyer and make it official.
On the other hand, if you’re ready to sell but don’t have a prospective buyer, a broker can be a tremendous help. Brokers maintain networks of eager, qualified buyers. And because your broker is invested in getting you the best sale price possible, they can encourage interested parties to bid against one another.
Do I Have the Time to Coordinate the Sale?
Selling a business isn’t like selling a car. It’s a sustained effort with endless loose ends to tie up.
If you’re an owner-operator or are otherwise deeply involved in the day-to-day operations of your business, you’ll likely find it overwhelming to add managing and coordinating a sale to the mix. However, if the role you play is relatively hands-off, you might be able to find the time.
Am I Familiar With the Sales Process?
One of the primary advantages business brokers offer is that they know exactly what steps must be taken to make a successful sale. A good broker will be able to ensure that you get an accurate valuation and help you negotiate a deal with the buyer you choose. They’ll also be able to guide you through the closing process.
In all the intricacies of the sale itself, it’s easy to forget about another important element: taxes. If you’ve never sold a business before, you may find it challenging to fully grasp the resulting tax consequences.
Taxes aren’t an area where you want to make a mistake, either. If you don’t file all necessary paperwork with the IRS or pay the appropriate amount, you could be charged with tax fraud. A good broker will help you handle all taxes associated with selling your business.
Take Time to Consider Whether a Business Broker Is Right for You
In nearly every situation, a business broker can facilitate a faster sale (and get you a better price) than if you sold your business on your own. That being said, not all business brokers are created equal.
Before committing to one, make sure you do your due diligence. When you take the time to find the right broker, they’ll be able to find you the right buyer in turn.