It is critical that owners of financial planning or accounting businesses desirous of selling their privately owned businesses retain the services of a business broking agency. That’s because a business broking agency provides invaluable services to business sellers. These include:
Assistance in Approaching the Sale in a Confidential Manner
The consequences of not maintaining confidentiality when listing a business for sale can be grave, especially if clients, associates, and competitors find out about the owner’s intention of selling the business, prematurely. But there is absolutely no way sellers can pre-screen buyers on their own and still maintain confidentiality. This is where the role of a business broking agency comes in. A business broking agency is able to pre-screen a number of buyers without disclosing the name and location of the business, thus assisting sellers in approaching the sale in a confidential manner.
Maintaining confidentiality is important not only because it helps avoid issues resulting from nervousness among employees about the uncertainty brought about by a change in ownership and unnecessary concerns by clients, but also because it helps prevent competitors from benefiting from the situation by misusing the information either to lure clients away or spread damaging rumors.
Professional business brokers are well-trained in maintaining the delicate balance between protecting the seller’s need for confidentiality and providing enough information to the buyer for making a proper evaluation. They provide proprietary financial and business data to the buyer in several stages in recognition of the importance of the confidential nature of a business sale. They provide minimal information upfront and gradually increase its volume over time as the relationship with the buyer progresses and it becomes evident that the buyer is both serious and qualified to make the purchase.
Assistance in Valuing the Business
A business broking agency also assists sellers in establishing a fair market value for their business using various valuation approaches including market, income, and asset approaches. Business brokers not only have the skill and training to evaluate and re-cast financial statements, but are also keenly aware of the key values currently sought by buyers.
Business brokers determine a price range for a business on the basis of industry, geographical and financial data, using the various business transaction databases that they have access to as reference points. It is important that sellers not only understand the value of their business, but also how it has been determined. That’s because many a times they can dramatically increase the value of their business by making small changes.
Assistance in Pre-qualifying the Business for Financing
Instances of buyers acquiring small businesses without the assistance of financiers are quite rare. The dominant majority of small business transactions conclude only through the help of third-party financing. The practice of involving financiers in small business transactions even before the buyer is located is quite common. In fact, it is desirable that a financing party be involved from the very beginning. Securing a funding source for a business sale transaction at an early stage is important as doing so greatly minimizes the time required in order to close the transaction. Businesses that have been pre-qualified for financing sell much faster.
A business broking agency often has business relationships with a variety of funding sources. These may include SBA lenders, commercial banks, private capital companies, etc. A business broker not only knows exactly the type of funding source that would be best for a particular transaction, but also knows which funding source would be willing to finance that particular transaction. Not only that, a business broker will also help a seller prepare and submit the required documents to small business lenders. After reviewing said documents the lender will approve the business’ pre-qualification for financing.
Assistance in Continuing to Run the Business
Assistance in continuing to run the business? Isn’t that a bit weird? How can brokers at a business broking agency help sellers continue running their business. Well, they can, and they do. Selling a privately owned business can be a long, complicated, tiresome, and even stressful process. Business owners who undertake this huge endeavor on their own soon realize that the sales process is a full-time job and it’s close to impossible to handle the process and still be able to manage the daily business operations. Business brokers make things a lot easier for sellers and enable them to fully focus on managing the daily business operations by taking control of the sales process. As a result, sellers are able to run their business all through the sales process, thus not only maintaining if not increasing the value of the business, but also reducing the risk of business erosion during the sale process.
Assistance in Qualifying Buyers
Reputed broking agencies not only possess the resources to locate a large number of potential buyers, but also have the tools and processes to pre-qualify buyers in a systematic manner on the basis of experience and financial capacity. As a result they have large databases of qualified buyers. But if their databases aren’t able to yield the desired results for any particular business, they make use of their vast networks of business intermediaries and other professionals that locate and deliver buyers who are in the market for such a business.
Assistance in Negotiating with the Buyer
The most important role of a business broker is that of a negotiator. A business broker acts as a bridge between the buyer and the seller, smoothing out all confrontational and polarizing issues and ensuring that the conflicting issues and personalities from each side do not blemish the relationship that has been established between the buyer and the seller and that it stays fully intact until the deal is concluded and the transaction is closed.
The process of closing a transaction is complex, but its complexity and complicatedness is further compounded by the astounding volume of paperwork involved. A business broking agency will coordinate, disseminate, and review the hordes of documents involved with the professional advisors hired by both the buyer and seller.
The presence of a business broking agency – a third party intermediary – greatly reduces the risks of direct conflicts between the buyer and seller and prevents potential emotionally charged questions and concerns from causing any serious damage to the negotiation process. The presence of a business broking agency also enables both parties to take a step from an unreasonable position without any serious blows to their egos or ending up feeling that their objectives have not been addressed, thus reducing the overall stress and increasing the chances of a successful transaction.
Assistance in Developing an Exit Plan
A business broking agency also helps the sellers develop a formal business exit plan and set out a specific timetable of actions to be taken. Doing so is important as it enables the sellers to have a clear plan of action and know exactly when and how they will be leaving the business. The exit plan is developed with the help and assistance of legal, accounting, and financial professionals. The exit plan is aimed at maximizing the value the seller receives when exiting the business regardless of the time taken by the seller to exit the business. A good exit plan enables the seller to take control of the terms and conditions of exiting their business and helps reduce the variability of the business control transfer and secure a sound financial future for themselves.