Every business broker has to start somewhere and learn. Unfortunately, however, there is a major learning curve involved with the profession. As a seller, you do not want to be a “learning experience” for a business broker who is new to the profession. Instead, we strongly recommend working with an experienced business broker. In this review, we discuss the role of a business broker and highlight five major reasons why you should choose a broker with at least a decade of experience and a track record of successful business sales.
The Role of a Business Broker Explained
A business broker is an intermediary that connects sellers and buyers together during a business transaction. This is an important role particularly for business sales as the transaction is done privately and in a manner that maintains confidentiality. In other words, rather than with a real estate transaction where the agent or broker lists the home publicly and maximizes the exposure, a business broker only utilizes private sales channels and needs to understand how to use confidential memorandums and non-disclosure agreements (NDAs).
Ultimately, a business broker helps with all stages of the sales journey, from providing an objective business valuation to marketing the company and finding a qualified buyer. They even help with the due diligence and closing stages of the sale as well.
5 Reasons to Choose an Experienced Business Broker
An experienced broker offers significant advantages that an inexperienced broker can not provide to the same extent. Specifically, five major reasons to choose a broker with more than a decade of experience are as follows.
Receive an Accurate Business Valuation The Potential Buyers Trust
The business valuation is the first step for business owners interested in selling. This involves a detailed review of your company’s financial information, a review of previous sales in your industry (and rule of thumb data) and the calculation of your company’s value. Non-financial information may be considered as well, such as your growth potential, location, and industry trends.
So, why is an experienced broker important during the valuation stage? Quite simply, an experienced broker better understands how to consider the specific details of your company and provide an accurate and personalized valuation. On the other hand, less experienced brokers are more likely to only consider your company’s financial information (including your EBITDA and SDE) and apply the financial metrics to rule of thumb data for your industry.
Although rule of thumb data is a great starting point for a business valuation, it is not the end-all-be-all. This can lead to inaccurate valuations that either overstate the market value of your company or lead you to sell for below market value. An experienced broker ensures the full worth of your company is recognized while still ensuring the value is justifiable during the negotiation stage.
Experienced Brokers Have Access to Hundreds of Potential Buyers
Qualified and experienced business brokers have access to various channels where they can connect with potential buyers. In fact, it is not uncommon for an experienced broker to have access to more than a thousand potential buyers via private databases, networks, and personal connections and contacts.
On the other hand, less experienced business brokers simply do not have the same level of access to potential buyers as this is something brokers build up over time. Additionally, buyers may be less likely to respond to them due to their lack of experience.
Receive Guidance and Sound Advice Through All Stages of The Sales Journey
Young and inexperienced business brokers may have a keen understanding of the general process for selling a company, but they do not have experience going through the sales journey. This is important as the sales process is different for every company, and there are unique complexities that are involved with every sale. An experienced business broker likely has a much better understanding of all stages of the sale and is better equipped to deal with unexpected obstacles and potential setbacks.
Minimize The Risk of Setbacks and Complications During The Sales Process
As mentioned, experienced business brokers understand how to deal with complexities that may not have been expected during the sales process. For the client, this minimizes the risk of setbacks that delay a deal being made and the sale closing. It also allows for a stress-free process. The client can trust that the process is being handled properly, and they can relax and have a more enjoyable experience, rather than having to micromanage the business broker and make sure they are not making mistakes (which often occurs with less experienced brokers).
Increase The Likelihood of Selling for Fair Market Value (or Higher)
Ultimately, an experienced broker helps ensure you sell for fair market value or higher. This is usually the primary goal during a business sale. The last thing a seller wants is to sell their company to only later find out the company was worth much more.
Ensuring a fair sales price starts with the valuation, which an experienced broker can ensure is accurate and trusted by potential buyers. From there, they can justify the asking price and negotiate a deal that leverages competing offers and maximizes the total worth of your company. Although it can be tempting for some owners to choose a less experienced broker who offers lower rates, experienced business brokers often pay for themselves and yield a nice return on investment as they can ensure a higher sale price.
Sigma Mergers and Acquisitions Has Helped Owners Sell Since 2003
Sigma Mergers has two decades of experience and has become one of the most trusted business brokers in Texas. Throughout the past 20 years, we have helped more than 600 companies successfully sell their company. We can help you as well. Contact us today for a free, no-cost business valuation.
