Should You Use a Broker to Sell Your Business?

Should You Use a Broker to Sell Your Business?

So, you’ve finally decided to sell your business. But are you clear on the next steps?

When the time comes to hand over your business, it’s imperative to get the best possible price for it. This process is not as easy as it sounds. You’ll need advice and expertise to help you transfer your company within a reasonable timeframe. More than anything, you’ll avoid the frustrations that could delay the sale or hinder you from receiving the maximum sale price.

A large industry has developed that specialises in the business of selling businesses. These firms will take a portion of the sale, but this isn’t a bad thing. For that commission, they’ll make sure you come out on top and end up with the maximum sale price in your pocket.

How do you know you’ll need a business broker to help you sell your business? First, let’s look at the upsides and downsides of selling a business without a broker.

What Are the Pros and Cons of Selling Your Business Without a Broker?

Pros and Cons of Selling Your Business Without a Broker

Pros

  • You get to keep all the money from the sale and do not have to pay commissions on the sale.
  • You own the process of the sale 100%, which is especially important if being involved is essential to you.
  • You understand your business and are in a great position to talk about it to potential buyers
  • You get to determine the price at which you are comfortable letting go of your business.

Cons

  • Putting a value on your business is complicated. You may overvalue your business and put off potential buyers or undervalue your business and get the short end of the deal.
  • The process of selling a business is time-consuming. It could take you away from your business. Your time would be better spent running the business as you await the sale.
  • You may not have the tools and resources to reach the most extensive possible customer base.
  • By selling on your own, you reveal your identity to potential buyers, something which business brokers keep confidential through the use of blind sale documents.
  • Brokers understand the basic legal requirements and can be of great assistance at the handover stage ensuring you are looked after.

Things You Should Consider or Ask Before You Hire a Business Broker

hiring a business broker

Should you decide to go with a business broker, then selecting the right one is crucial to the success of the sale. You should always do your due diligence and ensure that you are choosing the best possible firm to represent you. So, what are the key considerations when choosing a broker?

What Commissions Do Brokers Charge?

Perhaps this is the most critical question, as it will determine the final amount of money that goes into your pocket from the sale.

Most business brokers will charge you on the closing of the deal and take a commission based on a percentage of the price paid by the buyer, asking for up to 5% of the sale price. There may also be other fees, like administration and marketing fees. So, make sure to ask about the full fee structure before you proceed with your chosen broker.

What Do You Get For Your Money?

Brokers offer lots of services that could make the process of selling your business seamless. Business brokers provide:

  • Experience in marketing the business for sale, reducing expensive errors;
  • Time-saving advantages: they’ll market your business on your behalf, leaving you with time to concentrate on other things;
  • A marketing platform for your business, all included in the commission;
  • An independent intermediary and negotiator between you and the buyer;
  • Privacy from the buyer by using blind sale documents when executing the sale; and
  • A pre-qualification service to make sure you aren’t wasting time; you’ll only be dealing with buyers who can afford your business.
  • Solidify your exit strategy by giving you advice on any tax obligations to the Australian Taxation Office when selling or closing your business.

What Marketing Strategy Will the Broker Use?

broker marketing strategy on selling a business

This factor is one of the most crucial to consider. It’s the main reason why people decide to use brokers when selling their business. Brokers provide the leverage of a professional and well-oiled marketing platform.

Brokers should list your business on their website as well as on other industry websites and social media platforms. You should ask what their web traffic figures are, and how many qualified buyers are already on their databases.

Classified listings in industry magazines and the dailies are also advantageous to reach the most extensive customer base. Established brokers will also have a so-called “selling book” that showcases all the information that the broker will present to potential buyers.

How Successful Has the Broker Been in the Past?

This question goes without saying. Success sells, and it is prudent to deal with a broker who knows what they’re doing. Ask your broker these questions:

  • How many similar listings do they already have on their website?
  • How many similar businesses have they previously sold?
  • What was the average selling price?
  • What kind of volume does the brokerage handle yearly?
  • Have they ever been sued by a seller or buyer?
  • Do they have any client reference letters? What’s their industry reputation and accreditation?

What Is the Average Time It Will Take for the Broker to Sell Your Business?

The average time your business will take to sell will determine how fast you get your money. Successful brokers have a short turnaround time by utilising their skills and experience and a list of vetted potential buyers.

A good indicator is how long the brokerage listings for the previous year were on the market before they resulted in closed sales. The average acceptable sale period is six months to a year.

How Many Clients Does the Broker Currently Have?

The current client base is a good indicator of how busy the brokerage is and how experienced they are at what they do. Traffic also points to the reputation of the broker. How much web and physical traffic does the brokerage website and office generate per month?

A low client base would indicate that the broker is a novice. On the other hand, too large a client base may mean that they may not have sufficient time to give to your business.

Do They Have Expertise in Your Particular Industry?

Expertise is an essential factor. You would be more comfortable dealing with a broker who understands your industry and has a robust network of interested buyers.

A generalist will have their hands full with various types of businesses and not pay particular attention to industry trends and developments.

Does the Broker Already Have Potential Buyers Lined Up?

Potential buyers interested in your business and buyers already listed by the brokerage will shorten the period before closing and reduce the marketing fees charged by your broker.

Brokers Give Fair Valuations Based on Industry Standards

Perhaps one of the most critical points of value that brokers offer is their expertise in accurately valuing your business.

They will help you to value your business based on quantifiable criteria, and not an estimation of your net worth. With a broker’s help, you’ll be better positioned to defend the valuation and to reap the benefit of a trouble-free sale.

Furthermore, they will point out to you any issues with the business that may be affecting its worth. Their expertise will help you know what to do to increase the value of your business as you wait for the sale.

Brokers Provide Advice About Whether Your Business Is Set Up to Sell for the Most Money Possible

brokers advice how to sell your business for most money

An experienced broker will be able to review your financial statements and overall business standing. They’ll also offer suggestions about how you can improve your business to make it more attractive to potential buyers. As the sale process takes time, they’ll work with you to implement these changes, which will eventually result in you receiving the best sale price.

Business brokers may also advise you on whether you should merely pivot your business for the time being, until it is in the optimum sell position.

The Value of an Intermediary Between You and the Buyer

Confidentiality is vital, and not many business owners realise this fact. Selling your business could create a crisis of confidence with your staff and alert competitors to your plans. Unfortunately, you may also attract unwanted attention from potential buyers who are not pre-qualified.

A good broker will know how to market your business while protecting your privacy. They primarily do this by the use of blind documents, which list all the business’ features, but do not mention the identity of the business owner.

Brokers Have Stronger Negotiation Skills

After all, this is what they do for a living! Brokers will handle all the vital tasks like marketing, negotiating, document preparation, and explaining the business to potential buyers.

Their negotiation skills are top-notch, and they’ll likely get a better price for you than if you did the negotiating yourself.

The Bottom Line

There is nobody better suited to tell the story of your business to prospective buyers than you, the owner. However, the services of an experienced brokerage will allow you to remain focused. You can bring in the professionalism needed to see the sale through seamlessly by following the law of the land, and in a timely fashion.

Sometimes, the sale of the business may experience hurdles, or the company may not sell at all. A business broker is well-placed to deal with these tricky situations. They will keep the deal moving forward until the day you complete the business sale and finally get to enjoy the proceeds of the sale.