A business broker plays a crucial role in a business sale. In this review, we discuss the specific role of a business broker, highlighting their responsibilities and how they help ensure the buyer and seller are able to reach a fair deal that works for both sides.
What is a Business Broker?
A business broker is a professional who helps facilitate the sale of a company. Their role is to ensure the seller (the company owner) receives fair market value for their company during a sale. In some cases, a broker may work directly with a buyer as well to ensure they secure the best deal possible. They also help maintain the confidentiality of the sale and ensure the process moves smoothly from start to finish.
What Does a Business Broker Do?
A business broker serves as the intermediary between a seller and buyer during a business sale. However, their role is relatively complex and involves a range of responsibilities. Specifically, a business broker determines the market value of a company, finds qualified buyers, and secures a purchase deal for fair market value.
Determine Your Company’s Value
A business broker may first recommend a business valuation. This determines the economic value of your company. There are different types of valuations, including an asset-based, income-based, and market-based approach. Most commonly, brokers recommend a market approach, which uses previous sales data within the industry to gain a better understanding of a company’s worth.
Specifically, a broker may apply rule of thumb data with the seller’s discretionary earnings (SDE) and/or earnings before interest, taxes, depreciation, and amortization (EBITDA). Of course, they may also apply adjustments based on additional factors such as growth potential, location, and the owner’s reason for selling.
Leverage Their Resources to Find Qualified Buyers
A business broker can also leverage their resources to connect the seller with hundreds (or thousands) of potential buyers. Notably, this involves private channels, such as private databases, connections, and networks. Additionally, and importantly, the broker ensures the confidentiality of the sale through the use of non-disclosure agreements (NDAs). They may also keep certain details of a company private as well (i.e. the business name, precise location, etc.).
Moreover, the broker facilitates negotiations in a professional manner. This ensures talks with qualified buyers are productive and move closer to the best deal possible for both sides. Ultimately, the broker helps ensure the seller is able to secure a favorable price and reach their other, non-financial sales goals. All the while, the broker is there to answer questions and act on behalf of the seller until a deal is reached.
Need a Business Broker? Contact Sigma Mergers and Acquisitions Today
Sigma Mergers and Acquisitions help business owners sell their company for fair market value. We also provide free, no-obligation business valuations, so you can discover the worth of your company and make informed decisions accordingly. If you would like to learn more and receive a free valuation from a qualified and experienced broker, reach out to us today.