Demystifying Business Brokers: Your Guide to Selling Your Business

If you’re a business owner looking to sell your company, you may be considering hiring a business broker. But what exactly is a business broker and how can they help you with the process of selling your business? In this article, we’ll explore the role of business brokers, the importance of business valuation, and how to effectively sell your business.

Understanding Business Brokers

A business broker, also known as a business transfer agent or intermediary, is a professional who assists in buying and selling businesses. They act as intermediaries between buyers and sellers, helping to facilitate the sale of privately owned businesses.

What Business Brokers Do

Business brokers handle all aspects of the transaction process, from finding potential buyers to negotiating deals. They typically start by conducting a market analysis to determine the value of your business. Once they have established a fair market price, they will then use their network and marketing techniques to find potential buyers.

Once a potential buyer is found, the business broker will facilitate meetings between the seller and buyer and assist in negotiations. They also help with preparing necessary documents for the transaction, such as confidentiality agreements and purchase agreements.

Why Business Valuation is Important

Before selling your business, it’s important to have an accurate understanding of its value. This is where business valuation comes in. Business valuation is the process of determining the economic value of a business, taking into account factors such as assets, liabilities, cash flow, and market trends.

Having a professional business broker conduct a thorough valuation of your business is crucial in determining its market value. This not only helps in setting a fair asking price, but it also provides potential buyers with confidence in the transaction. It also helps in avoiding any disputes or disagreements during the negotiation process.

The Process of Selling a Business

Selling a business is a complex and time-consuming process. Hiring a business broker can help ease the burden and ensure that the transaction runs smoothly.

The first step in selling a business is to conduct an accurate valuation, as mentioned earlier. Once this is done, the business broker will work with the seller to develop a marketing strategy and identify potential buyers. They will then screen and qualify potential buyers to ensure they are serious and financially capable of making the purchase.

Once a suitable buyer is found, the business broker will facilitate meetings and negotiations between both parties. They also assist in drafting necessary documents for the transaction, such as letters of intent, confidentiality agreements, and purchase agreements.

Why You Need a Business Broker

Selling a business is not as simple as listing it on an online marketplace. It requires specialized knowledge and experience to navigate the complexities of the process and ensure a successful outcome.

Business brokers are trained professionals who specialize in buying and selling businesses. They have access to a vast network of potential buyers and understand the market trends and valuation methods. This puts them in the best position to negotiate on behalf of the seller and achieve the highest possible selling price.

The Benefits of Business Valuation

Aside from determining the market value of a business, there are other benefits to conducting a business valuation. It can help identify areas within the business that may need improvement or investment before putting it up for sale. It can also highlight the strengths and weaknesses of the business, allowing for improvements to be made before going to market.

Furthermore, a business valuation can provide valuable information for tax purposes and future financial planning. It gives business owners a clear understanding of their company’s value and can assist in making informed decisions about its future.

Conclusion

Engaging the expertise of business brokers in Orlando Florida, can be instrumental in getting the best deal when you decide to sell your business in Orlando. Their understanding of market trends, coupled with their expansive network of potential buyers, positions them as the most reliable professionals to help you navigate the intricacies of a business sale. Additionally, a thorough business valuation in Orlando will not only determine your business’s worth but also highlight areas for improvement, ultimately boosting its appeal to potential buyers. Therefore, whether you’re considering selling now or in the future, it’s essential to understand the value of your business and partner with a reputable business broker in Orlando Florida to ensure a smooth, profitable transaction.

Could the Red-Hot Market for Businesses Be Cooling Down

The economy is red hot, and that fact is translating over to lots of activity in businesses being sold.  However, it is possible that this record-breaking number of sales could cool down in the near future. In a recent article in Inc. entitled, “The Hot Market for Businesses is Likely to Cool, According to This New Survey,” the idea that the market for selling business is cooling down is explored in depth.  Rather dramatically, the article’s sub header states, “Entrepreneurs who are considering selling their companies say they’re worried about the future of the economy.”

The recent study conducted by Pepperdine University’s Graziadio School of Business as well as the International Business Brokers Association and the M&A Source surveyed 319 business brokers as well as mergers and acquisitions advisers.  And the results were less than rosy.

A whopping 83% of survey participants believed that the strong M&A market will come to end in just two years.  Perhaps more jarring is the fact that almost one-third of participants believe that the market would cool down before the end of 2019.

The participants believe that the economy will begin to slow down, and this change will negatively impact businesses.  As the economy slows down, businesses, in turn, will see a drop in their profits. This, of course, will serve to make them more challenging to sell.

The Inc. article quotes Laura Ward, a managing partner at M&A advisory firm Kingsbridge Capital Partners, “People are thinking about getting out before the next recession,” says Ward.  The Pepperdine survey noted that a full 80% of companies priced in the $1 million to $2 million range are now heading into retirement. In sharp contrast, 42% of companies priced in the $500,000 to $1 million range are heading into retirement.  Clearly, retirement remains a major reason why businesses are being sold.

Is now the time to sell your business?  For many, the answer is a clear “yes.” If the economy as a whole begins to slow down, then it is only logical to conclude that selling a business could become tougher as well.

The experts seem to agree that whether it is in one year or perhaps two, there will be a shift in the number of businesses being sold.  Now may very well be the right time for you to jump into the market and sell. The best way of making this conclusion is to work with a proven and experienced business broker.  Your broker will help you to analyze the various factors involved and make the best decision.

Copyright: Business Brokerage Press, Inc.

Marlee/BigStock.com

What Kind of Buyers are You Most Likely to Meet?

Selling a business can be an exciting and rather lucrative time.  But going through the sales process means embracing the notion that you’ll have to be very prepared for whatever might be thrown your way.  A key aspect of preparing to sell your business is to know what types of buyers you’re likely to encounter.

It is only logical to anticipate the types of buyers you may be dealing with in advance.  That will allow you to plan how you might potentially work with them.  Remember that each buyer comes with his or her own unique desires and objectives.

The Business Competitor

Competitors buy each other all the time.  Frequently, when a business is looking to sell, the owner or owners quickly turn to their competitors.  Turning to one’s competitors when it comes time to sell makes a good deal of sense; after all, they are in the same business, understand the industry and are more likely to understand the value of what you are offering.  With these prospective buyers, a great confidentiality agreement is, of course, a must.

Selling to Family Members

It is not at all uncommon for businesses to be sold to family members.  These buyers are often very familiar with the business, the industry as a whole and understand what is involved in owning and operating the business in question.

Often, family members are prepared and groomed years in advance to take over the operation of a business.  These are all pluses.  But there are some potential pitfalls as well, such as family members not having enough cash to buy or not being fully prepared to run the business.

Foreign Buyers

Quite often, foreign buyers have the funds needed to buy an existing business.  However, foreign buyers may face a range of difficulties including overcoming a language barrier and licensing issues.

Individual Buyers

Dealing with an individual buyer has many benefits.  These buyers tend to be a little older, ranging in age from 40 to 60.  For these buyers, owning a business is often a dream come true, and they frequently bring with them real-world corporate experience.  Dealing with a single buyer can also help expedite the process as you will have fewer individuals to negotiate with.

Financial Buyers

Financial buyers are often the most complicated buyers to deal with, as they can come with a long list of demands.  That stated, you should not dismiss financial buyers.  But just remember that they want to buy your business strictly for financial reasons.  That means they are not looking for a job or fulfilling a lifelong dream.  For financial buyers, the key point is that your business is generating adequate revenue.

Synergistic Buyers

A synergistic buyer can be an excellent candidate.  The reason that synergistic buyers can be such a good fit is that their business in some way complements yours.  In other words, there is a synergy between the businesses.  The main idea here is that by combining the two businesses they will reap a range of benefits, such as access to a new and very much aligned customer base.

Different types of buyers bring different types of issues to the table.  The good news is that business brokers know what different types of buyers are likely to expect out of a deal.

Copyright: Business Brokerage Press, Inc.

12587279/BigStock.com

New Year’s Resolutions & Selling Your Business

Most people fail to keep their New Year’s Resolutions.  But where buying and selling a business is concerned, failing to keep those resolutions could mean an abundance of lost opportunity.

Todd Ganos at Forbes recently penned a thought-provoking article entitled The 8 New Year’s Resolutions for the Sale of Your Business.  In this article, he compares selling a business to getting in shape in the months preceding your visit to the beach.  It is necessary to do a great deal of planning and hard work if you want to be in good shape for the big “beach body reveal.”

When it comes to selling a company, Ganos believes that there are eight factors that must be taken into consideration.  Listed below are those factors he feels are a must for business owners looking to get their business ready for “the beach.”  These are the eight factors that Ganos believes are most essential and should be on your New Years’ Resolution list for your business:

  1. Planning
  2. Legal
  3. Leadership
  4. Sales
  5. Marketing
  6. People
  7. Operations
  8. Financial

In order to get your business ready, it is necessary to take a good long and honest look at each of these eight important categories.

Planning is at the heart of everything.  He points out that owners who truly want to get their business ready for the market will want to adopt a focused month-by-month plan.

This plan means having discipline, developing a business plan and involving your team in the development of that plan.  Once the plan has been developed, it should be reviewed with your leadership team each month.

New Years’ Resolutions fail because they don’t get properly integrated into peoples’ lives.  And the same holds true for making changes in one’s businesses.  Ganos correctly asserts that in order to get your business ready to sell, you have to make it an “all-of-the-time thing” in which you are constantly focused on success.

New Years’ Resolutions have to be about doing things differently, having a plan and then sticking to these changes permanently.

Copyright: Business Brokerage Press, Inc.

mauscraft/BigStock.com

Confidentiality Agreements: What are the Most Important Elements?

Every business has to be concerned about maintaining confidentiality.  In fact, it is common for business owners to become somewhat obsessed with confidentiality when they are getting ready to sell their business.

It goes without saying that owners don’t want the word that they are selling to spread to the public, employees or most certainly their competitors.  Yet, there is something of a tug of war between the natural desire for confidentiality and the desire to sell a business for the highest amount possible.  At the end of the day, any business owner looking to sell his or her business will have to let prospective buyers “peek behind the curtain.”  Let’s explore some key points that any good confidentiality agreement should cover.

At the top of your confidentiality list should be the type of negotiations.  This aspect of the confidentiality agreement is, in fact, quite important as it stipulates whether the negotiations are secret or open.  Importantly, this part of the confidentiality agreement will outline what information can be revealed and what cannot be revealed.

Also consider the duration of the agreement.  Your agreement must be 100% clear as to how long the agreement is in effect.  If possible, your confidentiality agreement should be permanently binding.

You will undoubtedly want to outline what steps will be taken in the event that a breach does occur.  Having a confidentiality agreement that spells out what steps you can, and may, take if a breach does occur will help to enhance the effectiveness of your contract.  You want your prospective buyers to take the document very seriously, and this step will help make that a reality.

When it comes to “special considerations” category, this should be elements that apply to the business in question.  Patents are a good example.  A buyer could learn about inventions while “kicking the tires,” and you’ll want to be quite certain that any prospective buyer realizes that he or she must maintain confidentiality regarding any patent related information.

Of course, do not forget to include any applicable state laws.  If the prospective buyer is located outside of your state, then that is an issue that must be adequately addressed.

A confidentiality agreement is a legally binding agreement.  And it is important that all parties involved understand this critical fact.  Investing the money and time to create a professional confidentiality agreement is time and money very well spent.  An experienced business broker can prove invaluable in helping you navigate not just the confidentiality process, but also the process of buying and selling in general.

Copyright: Business Brokerage Press, Inc.

tashatuvango/BigStock.com

Goodwill and Its Importance to Your Business

What exactly does the term “goodwill” mean when it comes to buying or selling a business?  Usually, the term “goodwill” is a reference to all the effort that a seller puts into a business over the years that he or she operates that business.  In a sense, goodwill is the difference between an array of intangible, but important, assets and the total purchase price of the business.  It is important not to underestimate the value of goodwill as it relates to both the long-term and short-term success of any given business.

According to the M&A Dictionary, an intangible asset can be thought of as asset that is carried on the balance sheet, and it may include a company’s reputation or a recognized name in the market.  If a company is purchased for more than its book value, then the odds are excellent that goodwill has played a role.

Goodwill most definitely contrasts and should not be confused with “going concern value.”  Going concern value is usually defined as the fact that a business will continue to operate in a fashion that is consistent with its original intended purpose instead of failing and closing down.

Examples of goodwill can be quite varied.  Listed below are some of the more common and interesting examples:

  • A strong reputation
  • Name recognition
  • A good location
  • Proprietary designs
  • Trademarks
  • Copyrights
  • Trade secrets
  • Specialized know-how
  • Existing contracts
  • Skilled employees
  • Customized advertising materials
  • Technologically advanced equipment
  • Custom-built factory
  • Specialized tooling
  • A loyal customer base
  • Mailing list
  • Supplier list
  • Royalty agreements

In short, goodwill in the business realm isn’t exactly easy to define.  The simple fact, is that goodwill can, and usually does, encompass a wide and diverse array of factors.  There are, however, many other important elements to consider when evaluating and considering goodwill.  For example, standards require that companies which have intangible assets, including goodwill, be valued by an outside expert on an annual basis.  Essentially, a business owner simply can’t claim anything under the sun as an intangible asset.

Whether you are buying or selling a business, you should leverage the know how of seasoned experts.  An experienced business broker will be able to help guide you through the buying and selling process.  Understanding what is a real and valuable intangible asset or example of goodwill can be a key factor in the buying and selling process.  A business broker can act as your guide in both understanding and presenting goodwill variables.

Copyright: Business Brokerage Press, Inc.

mangostock/BigStock.com

The Sale of a Business May Actually Excite Employees

Many sellers worry that employees might “hit the panic button” when they learn that a business is up for sale.  Yet, in a recent article from mergers and acquisitions specialist Barbara Taylor entitled, “Selling Your Business?  3 Reasons Why Your Employees Will Be Thrilled,” Taylor brings up some thought-provoking points on why employees might actually be glad to hear this news.  Let’s take a closer look at the three reasons that Taylor believes employees might actually be pretty excited by the prospect of a sale.

Taylor is 100% correct in her assertion that employees may indeed get nervous when they hear that a business is up for sale.  She recounts her own experience selling a business in which she was concerned that her employees might “pack up their bags and leave once we (the owners) had permanently left the building.”  As it turns out, this wasn’t the case, as the employees did in fact stay on after the sale.

Interestingly, Taylor points to something of a paradox.  While employees may sometimes worry that a new owner will “come in and fire everyone” the opposite is usually the case.  Usually, the new owner is worried that everyone will quit and tries to ensure the opposite outcome.

Here Taylor brings up an excellent point for business owners to relay to their employees.  A new owner will likely mean enhanced job security, as the new owner is truly dependent on the expertise, know-how and experience that the current employees bring to the table.

A second reason that employees may be excited with the prospect of a new owner is their potential career advancement.  The size of your business will, to an extent, dictate the opportunities for advancement.  However, if a larger entity buys your business then it is suddenly possible for your employees to have a range of new career advancement opportunities.  As Taylor points out, if your business goes from a “mom and pop operation” to a mid-sized company overnight, then your employees will suddenly have new opportunities before them.

Finally, selling a business could mean “new growth, energy and ideas.”  Taylor discusses how she had worked with a 72-year-old business owner that was exhausted and simply didn’t have the energy to run the business.  This business owner felt that a new owner would bring new ideas and new energy and, as a result, the option for new growth.

There is no way around it, Taylor’s article definitely provides ample food for thought.  It underscores the fact that how information is presented is critical.  It is not prudent to assume that your employees may panic if you sell your business.  The simple fact is that if you provide them with the right information, your employees may see a wealth of opportunity in the sale of your business.

Copyright: Business Brokerage Press, Inc.

VadimGuzhva/BigStock.com

A Look at Divestopedia’s Article, “The Myth of Fair Business Valuation”

In Divestopedia’s article, “The Myth of Fair Business Valuation: What Professional Valuations Don’t Tell You,” author Chak Reddy is quick to point out that the “type of buyer and method of sale are two important (yet often overlooked) value determinants when finding a starting price for your business.”

Reddy brings up some excellent points.  One notion in particular that every business owner should be aware of is that there is “NO fair value for illiquid assets.”  He points to the fact that between January 2007 and March 2008, the historic Bear Stearns went from a value of $20 billion dollars to just $238 million.  In a mere 14 months, Bear Stearns lost most of its value.

Additionally, the article points to the fact that business owners often suffer enormously from “dramatic valuation compression.”  In Reddy’s view, this compression is the direct result of poor planning and a failure on the part of business owners to select the right advisory teams.

Reddy believes that professional valuations can be quite lacking.  He feels that they are “contingent on multiple assumptions,” and that the valuations are only as good as the assumptions upon which they are based.  In other words, professional valuations can be limited and flawed.  In particular, he points to the fact that two of the most important factors in valuations, future growth rate and operational synergies are “highly subjective and no two views on these topics are likely to be identical.”  Summed up another way, valuations are inherently a matter of opinion and perspective.  Reddy feels that a seller will be “lucky” if the real sales price comes within 10% to 20% of the professional valuation.

In the end, as always, it is the market that determines value. It is the acquirer who will determine the value more than any other factor.  The perception of the buyer will play a key role in the process and, further to the point, no two buyers will perceive the business exactly the same way.  In other words, valuations can be tricky and certainly do involve a personal element of the individual who is appraising the business’ value.  Adding to this point, Reddy states, “From our experience, the type of buyer and the type of sale skew the valuation to such an extent that it is unwise for a business owner to not be familiar with these variables and their impact before the beginning of the sales process.”

Ultimately, finding the right buyer is essential and this is where a business broker can prove simply invaluable.  And finding that right buyer may take time.

Copyright: Business Brokerage Press, Inc.

Successphoto/BigStock.com

5 Big Questions to Consider when Financing a Business Sale

How should the purchase of a business be structured?  This is a point that you’ll want to address early in the sale process.  For most people, buying or selling a business is one of the most, if not the most, important business decision that they will ever make.  For this reason, it is vital not to wait until the last minute to structure your deal. Let’s turn our attention to the most significant questions that you need to answer when entering the sales process.

1. What is My Lowest Price?

The first question you should ask yourself is, “What is the lowest price I’m willing to take?”  If an offer is made, the last thing you want is to be sitting around trying to decide if you can take a given offer at a given price.  You need to be ready to jump if the right offer is made.

2. What are the Tax Implications?

Secondly, you’ll want to seriously consider the tax consequences of any sale.  Taxes are always a fact of life and you need to work with a professional, such as an accountant or business broker, to understand the tax implication of any decision you make.

3. What are the Interest Rates?

The third factor you want to consider is interest rates.  If you get a buyer, what is an acceptable interest rate for a seller financed sale?

4. Are there Additional Costs Involved?

A fourth key question to ask yourself is do you have any unsecured creditors that have not been paid off?  Additionally, you’ll also want to determine whether or not the seller plans on paying for a part of the closing costs.

5. Will the Buyer Need to Assume Debt?

Finally, will the buyer need to assume any long-term or secured debt?  The issue of long term and/or secured debt is no small issue. Be sure to clarify this important point well in advance.  Also keep in mind that favorable terms typically translate to a higher sales price.

Business brokers are experts at buying and selling all kinds of businesses.  When it comes time to structure a deal that benefits both the buyer and the seller, business brokers can prove to be invaluable.  At the end of the day, working with a business broker is one of the single biggest steps you can take to ensure that your business is sold and sold as quickly as possible.

Copyright: Business Brokerage Press, Inc.

cclimj/BigStock.com

Obtaining a Fair Market Value for Your Business

Divestopedia published a rather insightful article, “Letting the Market Bridge the Valuation Gap.”  In this October 2018 article, Dave Kauppi dives in and explores how fair market value can be used as a way for business owners to “bridge the gap between the valuation they feel they deserve and that which they’re likely to receive.”  This, of course, increases the chances of a deal actually taking place.  Let’s turn our attention to some of the key points in Kauppi’s informative article.

Understanding the Reality of Selling a Business

One key point is that only a low percentage of businesses actually sell on their first attempt.  The article points out that a mere 10% of businesses that are for sale are actually sold three years later; this is a simply brutal fact.  Few facts, if any, help underscore the value of working with a business broker more than this point.  Selling a business can be difficult under even the best of circumstances.  The process is complex, and most sellers have never actually sold a business before.

Divestopedia believes that it is critical for business owners to have realistic expectations regarding valuation.  As the article points out, the market doesn’t care “how much money you need for retirement,” or how much you’ve invested.

Four Points to Consider

According to the article, it is important that business owners understand that a few business characteristics will ultimately drive the sale.  There are four key factors to consider: contractually recurring revenue, durable competitive advantage, growth rate and customer concentration.

There is a lot packed into these four points, but here are a couple of big takeaways.  In terms of customer growth, if a large percentage of your business is derived from a single customer, then that is going to be seen as a problem.  As Divestopedia points out, if your company is dependent and partially dependent on a single customer, then you can expect a lot of pressure for you, as the business owner, to stick around a lot longer to ensure that this key customer isn’t lost.  If intellectual property, such as software, is involved, then things can get even more complex.  In the end, determining value in technology-based companies can be more challenging.

In the end, working with a seasoned business broker, one that understands valuation and how best to get there, is a must.  You want to receive the best possible price for your business.  An experienced business broker will help you understand how to navigate the complex process of determining a price.  However, and most importantly, a business broker will help you achieve a fair market value, so that your business doesn’t remain unsold for years.

Copyright: Business Brokerage Press, Inc.

zeatrue/BigStock.com