Maximizing Your Success: The Power of a Skilled Business Broker

A business broker plays a crucial role in assisting buyers and sellers of small to mid-sized businesses. They are responsible for guiding the transaction from start to finish and providing valuable assistance to both parties involved. In this blog post, we will be exploring the role of a business broker and the various steps involved in the process of selling a business.

Who Does a Business Broker Represent?

Similar to a real estate broker, a business broker only represents one side of the transaction. Most business brokers work for the seller and do not represent buyers. This is due to the confidential nature of selling a business, where the seller's identity is often kept confidential. A sell-side broker is more concerned with keeping the seller's information private and fears that opening up the listing to outside brokers could jeopardize the successful sale.

When a broker represents the seller of a business, their main responsibility is to identify potential buyers through various marketing channels, such as business for sale websites, digital marketing, and their own network. A typical listing generates 60-100 buyer candidates over the course of the sales process, which can last anywhere from 3-12 months.

Maintaining Confidentiality

One of the key aspects of selling a business is keeping the listing confidential. Unlike real estate, a business broker does not want people to know that the company is for sale. Family members, employees, vendors, customers, and even family members may not be aware of the sale. Keeping the listing confidential protects the business and helps ensure a successful sale.

All buyers are required to sign a Non-Disclosure Agreement (NDA) and provide background information to the broker. This information helps the broker assess the buyer's experience level and determine if they are a good fit for the business. Once the buyer is approved, they are given a summary of the business and limited financial information to help them determine if the opportunity meets their criteria.

Buyer-Seller Meeting

One of the more exciting steps in the sales process is the initial meeting between the buyer and seller. This meeting, which can take place in person or over video conference, allows the buyer to ask questions about the business and get to know the seller. The meeting usually lasts 60-90 minutes and helps generate further interest in the company.

After the meeting, it is not uncommon for the buyer to begin preparing an offer for the seller to consider. Depending on the buyer and the business, the broker may ask the buyer to provide proof of financing and a bank statement to reassure the seller that they are qualified.

Due Diligence

Once an offer is accepted, the buyer and seller move on to the due diligence stage, which is one of the most critical parts of the transaction. The buyer will engage an attorney to draft the asset purchase agreement and other relevant documents. The broker will manage a secure data room where the parties can share tax returns, contracts, payroll data, technology, leases, and other relevant information.

A good business broker will manage the due diligence process and address any issues that arise during this stage to ensure the deal moves smoothly toward closing.

Closing

The lender for the business sale is usually the last step in the closing process. It can take anywhere from 60-120 days for the bank to grant all necessary approvals for the parties to close. If real estate is also being sold, the closing process may take longer.

In summary, hiring a business broker can increase the odds of successfully selling a business. It is estimated that only 10-20% of businesses sell without a broker, but the chances of a successful sale can rise to 25-30% with a broker's involvement. A business broker not only secures a favorable price and handles the paperwork

 Additional Reading:

What are the 7 factors to consider when selling your business?

 When buying a business here are strategies that work

An example of purchasing a business with SBA financing