There is a market for almost everything that can be bought and sold, and this includes entire businesses. But a business is not like a single commodity that has a fixed price— buying and selling them could get a bit tricky.
A business broker is a professional— be it a person or a company— who acts as an intermediary between a buyer and a seller of a business. Their services are required because before a business can be sold, cost and market analysis have to be carried out to determine the value of the business, and subsequently, the price negotiated.
Selling a business also goes beyond price. There are other considerations like legal, advertising, patents or intellectual property, and market position— i.e. if the business being sold is deemed valuable, if not, buyers may not be willing to pay a premium price. This is a complex process that requires expertise that small to medium-sized business owners may not possess. Most of these owners then hire the help of companies like Sunbelt Business Brokers to help sell their businesses to a buyer at a premium price.
How business brokers can help you
Business brokers perform an array of tasks all associated with the sale of a business. Some of these tasks include:
1. Handling the legal paperwork
Transferring ownership of a business involves quite a lot of paperwork. Business brokers are equipped to handle the paperwork required. They are also intimate with laws and other requirements for a smooth transaction.
2. Running marketing campaigns
Business brokers take care of the marketing requirements associated with selling a business. They develop and execute marketing strategies that position your business for buyers that are willing to pay a premium. In the case of buyers, they vet sellers and their businesses to ensure you’re getting a healthy business with the potential for growth.
Business brokers represent you when buying or selling, so you can focus on other things and avoid unnecessary spotlight.
4. Taking care of the financials
This ranges from valuation to managing existing debt to ensuring all financial records are available and in order and handling escrow. Established business brokers already have relationships and ties with business sellers and buyers, making it easier for them to sell your business or find the right one for you to buy.
In short, business brokers take all the work off your hands. If you were to try to handle all this yourself, you would need to hire multiple professionals in different fields which would inevitably cost far more.
While the approach used for the buying and selling of businesses may differ based on the size of the business, market conditions and industry, the general process business brokers use include:
1. Assessing buyer/seller objectives
Business brokers determine what their clients want out of the sale or purchase of a business. They keep these objectives in mind throughout the entire process.
2. Conducting business evaluation
In the case of sellers, they evaluate your business, reviewing your current products services, operations and activities, and profits and debts. Business brokers create marketing strategies custom to your business to maximize effectiveness and exposure. This provides insights on the state of your business that aids them in presenting your business in the best possible light to potential buyers.
3. Assessing potential buyers and sellers
Business brokers only accept serious buyers that are willing and able to pay a premium for your business. In the case of buyers, they assess potential sellers and their businesses to guarantee the purchase of a healthy business. Once buyers and sellers are in agreement, they facilitate the transfer of funds and ownership, making the entire process a smooth experience.
How much do they cost?
Business brokers usually charge about 10 percent of sales as fees for small businesses. For larger companies— companies above $1million— brokers use the Lehman’s scale. This involves charging 5 percent for the first million, 4 percent for the second million, 3 percent for the third, and so on. However, because of inflation, brokerage firms today apply a multiple of 2 to the formula.