Why use a business broker you ask yourself? Business brokers, what are they? What do they do? When should you use a business broker? Breaking down the role of a business broker comes from understanding what goes to the buying and selling of a business. As is the case with houses, a transaction involving a business requires more than just a buyer and a seller. Accountants, lawyers, conveyancers, landlords, managing agents, franchisors and government licensing authorities can all potentially have a say whether a sale goes ahead or not. It is the job of a business broker to navigate the various steps and ensure the final result is in the best interest of their client. Here are the reasons why you should consider using the services of a business broker.
1. Legal protection
The story of a business transaction doesn’t just feature the buyer and seller. They may have the starring roles, but there are other elements needed to ensure a happy ending. A Contract of Sale for a business acquisition can require the input of several supporting players, including accountants and conveyors. This is most notable in the due diligence process, where a buyer and seller are working towards a settlement. A broker acts a go-between that liaises with the various other parties to ensure the process is as pain-free as possible. The role of a broker is to ensure the required documentation reflects the needs of the purchaser.
2. Your emotion-free negotiator
When emotions run high, the presence of a cool head is invaluable. In business transactions, this comes in the form of a broker – someone who knows the motivations of both parties involved and can balance them accordingly. Their lack of emotional investment means they won’t take offence to negative news, while their extensive knowledge of business terms and language mean they will be able to keep pace with any professional people the buyer brings to the negotiation. Possible areas of contention such as price are instead mediated to become points of consensus.
3. Multi-pronged marketing opportunities
The right buyer for a business is not always waiting in the wings. They can take time to find. A business broker can accelerate the search by marketing key values to suitable buyers. They not only help a seller explore networks of competitors, customers, employees, friends, family, and industry professionals, but can also put them in touch with prospective buyers from their own mailing lists. A broker can also provide advice on the best mode of advertising for business through assessing the value of channels such as social media, the internet, local and state newspapers, and trade journals.
4. Confidentiality will be maintained
As a seller, you obviously want prospective buyers to know you are putting a business on the market, but they don’t need to know everything. The advertisement of a business for sale has the potential to unsettle staff, suppliers and clients, which could, in turn, do damage to what is being sold. A business broker carries out instructions from the seller to ensure the level of privacy they desire is maintained. This could include setting up a confidentiality agreement that requires confidentiality from both parties and also comes with an expiration date. A broker can also assist in the creation of a selling memorandum to send to prospective buyers after they have signed a confidentiality agreement.
5. Make use of their valuation expertise
When you buy a business, what are you actually paying for? The equipment? The stock? Its reputation among clients? You are paying for everything that comes with it, which essentially means all of the above, but there are key aspects that dictate the value of an enterprise. A business that is overpriced will have trouble attracting buyers on the open market, while a business that is underpriced could attract the wrong type of buyer This knowledge comes with the territory of being a business broker, given they have to know if every inch of the clients they represent.
6. Get introduced to pre-qualified buyers only
A business broker knows the information required to craft an ad that will help unqualified buyers opt themselves out, while also providing the necessary screening to assess those that are interested. This includes whether a buyer has the necessary education, licenses, certifications or experience, as well as whether they can make an offer within your timeframe. The screening process means you are not providing sensitive material to buyers who do not fit your criteria. This is about not only finding someone with the financial means to take over the operation, but also a buyer that is aligned with the culture of the business being sold.
7. Continue to focus on running your business
If the transaction for the sale of a business could be conducted overnight then it would make sense for the buyer to do it themselves. Unfortunately, this is not the case. Selling a business is a process that takes time, during which the day-to-day operations of the enterprise must continue. Any dip in revenue could make the business less attractive to prospective buyers, which is why it makes sense for a broker to focus on marketing the business, leaving the seller to ensure it is an attractive prospect on the market. The less impact an impending sale has on a business and its staff, the better.
8. Access to extended tools and resources
A business owner’s network traditionally consists of clients, suppliers and staff. A business brokers network comprises buyers and sellers. Other than accelerating the search for a buyer, this can also be useful in determining someone’s level of interest. A business broker can help verify information relating to a prospective buyer’s financial capability, as well as any other relevant parts of their application. The connections and market knowledge of a broker can also come in handy when it comes to setting the sale price of a business. They can set a price that can be defended when questioned, rather than one just reflecting the desire of the seller.
9. Sell efficiently by using strategies that work
The sale of a business doesn’t happen without a price and a listing that reflects the key elements of the business. Business brokers to lay the groundwork of the transaction through a series of steps, including appraising and assessing the business, studying accounts, consulting on share sale or going concern sale, as well as eventually listing the business. The presentation of facts is a key requirement of a business broker and can often set the tone for the remaining steps of the transaction. If a broker has sold a similar business, then they know what works and what doesn’t.
10. Maximize your profit
There are multiple factors that can lead to a business being sold for less than what it is worth. A seller may set the sale price too low or become frustrated at the lack of interest and bring the price down. The business could also be marketed to buyers that are only interested in a bargain. The use of a business broker helps to convey the core values to a suitable marketplace, leaving the attributes to speak for themselves. A broker’s knowledge of the wider market means they are able to address any fluctuations that may occur.
Why use a business broker? Why use GMO business brokers?
Still not sure why you should use a business broker? A business owner knows what it takes to run a business. A business broker knows what it takes to sell a business. Since being founded more than 30 years ago, GMO has transacted thousands of thousands of small and medium-sized enterprises in a wide variety of industries, ranging in value from a micro business of $100,000 to large privately held businesses up to $15 million dollars. Our team of business brokers brings together valuation, negotiation, mediation and sales skills. We offer a professional appraisal of business value, a dedicated team of marketers with experience across multiple media platforms, and a large database of qualified purchasers, accountants, migration agents and investors. Our philosophy has always been selling a business for the maximum price in the shortest realistic time frame with the utmost confidentiality. Contact us by e-mail or call us at +61 894 81 4422