There are many reasons to sell a business. Perhaps you’ve grown your company as far as it can go, and no one in the family wants to take over from you. Or maybe your industry has changed so much that what was once an attractive investment isn’t anymore. Maybe the market isn’t what it used to be, or an illness has made it tough for you to keep up with things. Whatever the reason, getting the best price for your business will require expert help. In most cases, you don’t have the experience or time to value your own company accurately, not to mention the expertise needed to find a buyer and negotiate a deal.
A business broker is someone who has that expertise on tap. Working with a good business broker can mean all the difference between selling a business at an attractive price and getting stuck with a subpar offer because you were trying to do things independently. A qualified business broker has access to a network of potential buyers looking for specific types of businesses in your industry, as well as knowledge of customary sale prices in given regions and market conditions.
There are two ways you can go with a business valuation. Your broker can help you determine the price of your business by looking at comparable companies that have been sold recently and adjusting for any differences between those businesses and yours. That’s called a market value approach.
The other way is to determine the value of your business based on records showing what it’s earning and paying special attention to recent trends. That approach calculates a replacement cost for your assets (the accounts receivable, equipment, and inventory) minus depreciation. That’s called an income approach.
Either method can be accurate if done right, but many buyers will want some kind of proof that you know what you’re talking about when it comes time to make an offer. Business brokerages typically use both methods together when they place a value on a company, or at least show which ones were used for any information given to potential buyers.
Know What Your Business Is Worth
Some brokers will do a free evaluation for you, but it’s up to you to make sure that all of the potential value of your business is represented. If there are some intangible assets in your company, customer lists, proprietary processes, or trademarks, don’t forget to include them.
The Business Sales Process
Once you’ve decided to sell a business, the business broker will assist you through the entire sales process. This might include contacting and qualifying potential buyers, meeting and negotiating with those people, taking care of necessary paperwork, and drawing up a final sales agreement.
As part of their service, most business brokers will even represent you in negotiations or attend negotiations on your behalf. That way, they can make sure everything is being done legally and ethically, as well as protecting confidentiality while still keeping their eyes open for ways to help close the best deal possible.
Some business brokers also offer consulting services to help you get your company ready for sale. This may include helping to improve cash flow, making organizational changes, or even buying out a partner who has an interest in the business but doesn’t want to sell. In most cases, a business broker will charge the same fee whether they sell your company in three months or three years.
A good business broker can be extremely helpful when it comes time to sell your company, and hopefully lead you to get a better price than you would have had on your own.
Do Your Research
Before you hire a business broker, it’s essential to do some research of your own first. A little investigation into the person you’re thinking about working with can go a long way toward protecting yourself throughout the sales process.
Many business brokers will list their previous transactions, the number of companies they’ve sold, and their experience on their websites. This information can help you determine exactly what kind of experience a business broker can bring to the table and how they match up with your specific needs.