Reasons for a business broker

There are many reasons to use a business broker when selling your business. The most basic reason is they are in the business of selling businesses. They will market your business and help to get prospective buyers to look at your deal. They will help in setting an asking price based on their knowledge and experience. If they have gone through the certification program their price would be considered expert testimony and therefore is given a great deal of creditability. Keeping the owner from underselling their business or over pricing their company is part of their legitimate function to their client. Since they know how to find buyers who are qualified and ready to deal on a business of their liking, they can help to cut down the time a business has to be on the market. Consistently a business broker will move a business quicker and usually at a very fair price.

What does a business broker do?

They can help the seller get the information needed by the buyer to make a decision on buying the business. This role is critical as nothing happens until a price is established and the business facts are known. Presenting the facts in a professional form is another common service that a business broker will give a client. This service can be the difference between a seller making a deal and the deal going south. Professional presentation of pertinent facts about a business is necessary in order to attract potential buyers. It is this factual information that helps buyers make intelligent decisions about such a purchase. Since the business broker does this type of work year round, the information is shown in its most positive form. Practice does make perfect in this case.

The business broker is also the go-between for passage of information between the buyer and the seller. This enables better communication and cooperation between the buyer and the seller. The role of a disinterested third party is effective in letting the business broker move the dealing along on the sale of the business. The business broker must treat both sides fairly as his next clients are given existing clients as references for his work. It is imperative that the fairness issue is communicated to the next client. Since all aspects of the sale pass through the broker, this neutrality is important and also the advice given to both sides of the deal.

Marketing the business

Without a broker, the seller would have to market the property and would not have access to a pool of potential buyers. The buyer would not have access to the pool of sellers the broker has available. This need by both parties is the reason that most businesses are sold with the help of a business broker. Their expertise in helping to set the selling price cannot be overstated. A busy broker over time helps to sell many types of businesses and this real time experience is invaluable to the process coming to completion. A competent broker will also know the legal requirements for many types of businesses that the brokers in a geographical area. This prevents problems that can be prevented from taking place and decisions being made without all of the facts.

If he is not a certified broker as to setting a selling price, he will have referrals to brokers or CPAs that do have this credential. The advantage to the seller is the business will be set at a selling price that can be logically defended when questioned about how the price was set. It is not just a price that the seller picked from thin air of a wish list price.
Broker assisted negotiation

Since the broker will usually know what the buyer is willing to pay and what the seller is willing to accept, the broker can lead both sides to a price that is somewhere in the area that both are willing to live with. Without this outside force, either party may never approach this price.

A broker has another ability to deliver that makes their service worth the cost. Maybe the business is a one of a kind business and not one that comes to market every day. Businesses like this are hard to evaluate as to their market value and even more importantly there may be a need to come up with a unique marketing plan to sell the business. A good brokerage firm can do both and solve the problem with a greater chance of success than the owners of the business could do by themselves. They have access to a network of brokers who handle all types of businesses that are for sale. The business may be unique in the geographic area it is located in, but there could well be one in another part of the country that was successfully marketed by a broker in that area. Use of the network is exclusive to the broker community and private individuals will not have access to the information that can be obtained from the network. Information is power, and this kind of help may be the only way the business could be successfully marketed. How other brokers sold a similar business can lead the broker in question to come up with a plan that has a good chance to work. This service to the seller is priceless and could make the difference between no-sale and sold. The seller could have wasted a great deal of time and money on an approach that would not work. Ferreting out potential buyers is the name of the game. The wrong approach could easily come up empty. All of this is sufficient reason to employ and expert when selling a business.

Conclusions

The fact that they will actively market your business is plus. The current owner does not have the time or knowledge to find buyers and set a fair price. They will usually set their price too high or too low. If they have a hard time coming up with any buyers, this can bring on frustration and an unneeded reduction of the selling price. It the wrong buyers are seeing the ad for your business, then only a bargain will attract their attention. A buyer who understood your business would readily see the value in a fairly priced offer. This is tricky and the result can be dramatically influenced by hiring a pro to help with the sale.

Another reason for the use of a pro is they can talk the language of professional people the buyers bring into the sale negotiation. If the terms that they communicate in are not understood, the buyer's advisors will not be impressed and may kill the sale. Hiring the professional business broker can prevent lack of intelligent conversation. He will know the terms and their meanings and be able to give the needed answers to move the sale along. This knowledge and expertise is the reason that such a person should be hired to help you make the sale of your business. Their ability to use previous sales and how they were completed is a facet of their knowledge base. There is no way the current owner could bring that to the negotiating table.