6 Types of Information Your Business Brokers Need From You
Want to sell your business? Do you feel like it’s time to hang it up and move on to something else? Whatever your reason for wanting to sell, a business broker should be at the top of your list of calls to make.
But before interviewing business brokers, you have homework to do: gathering and organizing everything a potential buyer will want to know about your business. Buyers want clear data that will convince them your business will be profitable after you’re gone.
So if you’re looking for a smooth sale at the highest price possible, you will want to prepare the right paperwork and packaging documents ahead of time. Here are six key types of information business brokers like Sunbelt Business Brokers need to set you up for success:
1. Organized Financial Statements
If you haven’t been good about record keeping, start with organizing your financial statements first. You may want to bring in a certified public accountant if necessary. It may save you time and add to the credibility of your financial documents.
You will need the following documents:
Tax Returns: For two to three years, five would be better
Profit and Loss Statements: For two to three years
Balance Sheet: A snapshot of the business’s assets and liabilities
Cash Flow Statement: A snapshot of how much cash you have on hand
A solid package showing your financials can signal to buyers that you’re serious about selling.
2. Your Reason for Selling
Are you ready to retire? Do you want to start another business? Do you think the market is hot for selling? Business brokers can direct their strategies and marketing according to your motivation for selling and your goal of when you want to sell.
3. What You Think Your Business Is Worth
The valuation of your business can be done in several ways. While your business brokers will handle this for you, having an initial estimate of how much you think your business is worth can give your business brokers an idea of your expectations. It can also help you gather the right documents to present to your business brokers.
You can start with Sunbelt Business Brokers’ free business valuation calculator.
4. The SWOT of Your Business
What are your company’s strengths, weaknesses, opportunities, and threats (SWOT)? Providing your business brokers with your evaluation of factors like the presence of loyal customers, environmental risks, innovation, and potential regulatory changes can go a long way in developing the right strategies for your business.
5. Operational Details of Your Business
The operational details of your business include:
The name and organizational structure
A customer list
A list of employees and their roles and responsibilities
Suppliers
Contracts
Licenses
Permits
Policies and procedures
Inventory
Equipment
Beyond the financial information, buyers will pay particular attention to how the company is run.
6. Other Notable Aspects of Your Business
You certainly want to place your company in the best light, but you also want to make a potential buyer aware of any issues that might create headwinds for the business.
Compile a record of any lawsuits that might impact your business, whether your company is involved or not. You also should provide records of any issues with employees or other human resources issues.
Setting Yourself Up to Win
Putting together these six types of information for your business brokers will show them you’re serious about selling your business. Together, you can set your company up to achieve the outcome you want.
What Kind of Businesses Do Business Brokers Work With?
The International Business Brokers Association notes that business intermediaries — business brokers, merger and acquisition advisors (M&A advisors), and investment bankers — tend to segment themselves by dollar amounts of value or revenue.
While many business brokers work with what are commonly referred to as “Main Street businesses” — those valued at less than $2 million — some, like Sunbelt Business Brokers, work with lower-to-middle market companies valued at more than $20 million.
Be that as it may, as you wonder whether business brokers would work to buy or sell your business, it’s better to focus more on the complexity of your business and the transaction as opposed to strictly considering the value of your business.
Selling or buying a business is a complex transaction no matter its size; what’s most important is having a professional business intermediary or team that can handle your deal from beginning to end, allowing you to stay focused on running your company. With that being said, read on to find out what kinds of businesses work with business brokers in order to be bought or sold.
Businesses Handled by Business Brokers
The experience, skills, and services of business brokers most often determine the businesses they work with.
Nevertheless, handling everything from valuations to negotiations and maintaining confidentiality to ensuring compliance with regulations means they often work with a wide swath of businesses, including (but certainly not limited to) the following:
Auto body shops
Hair salons
Restaurants
Pet stores
Construction companies
Tech companies
Printing shops
Cleaning businesses
Lawn care
Property management firms
For you, the key is finding the business brokers that fit for buying or selling your company; if you’re selling, consider starting your journey with the business valuation calculator provided by Sunbelt Business Brokers.
Small and Medium Businesses Bought and Sold
Among business intermediaries, business brokers handle transactions for small and medium businesses from initial consultation to closing, and they often help with valuation, marketing, vetting buyers, and negotiating and structuring deals, among many other tasks.
With that said, it’s clear that business brokers come from a range of backgrounds and wear a lot of different hats in bringing buyers and sellers together, so as you work to choose business brokers to handle a purchase or sale, ask the following questions:
How long have you been a business broker?
What is your success rate?
What accreditations do you have?
Are you a real estate agent?
What size businesses do you buy and sell?
That answer to that last question, in particular, will let you know the kind of companies your prospective business brokers normally work with, allowing you to ascertain whether they’d be a good fit for you right out of the gate.
Find the Right Business Intermediary for Your Business
When it comes to business intermediaries, there are no clear boundaries establishing the types of companies business brokers work with; some business brokers, like Sunbelt Business Brokers, have dedicated advisors who have bought and sold Main Street and lower-middle market businesses. Your business might be one of the businesses on the list above, or it might have revenue below $25 million. Either way, there are business brokers who will work with you, but you have to put in the work to find the ones who will work best for you.
Is Your Business Suitable for Sale by Business Brokers?
Making the decision to sell your business is a big step. However, it’s the first in a line of many other major decisions. And in this case, the next decision is whether you should work with a business broker to find potential buyers and negotiate a fair deal structure.
Should you use business brokers to sell? Is your business one a broker would take on? Here’s a look at what factors to consider.
Is Your Business Successful?
Business brokers aren’t obligated to take on every single business they come across. There may be some who know buyers interested in buying and flipping failing businesses, but most people interested in buying a business want to make sure that it’s at least somewhat successful.
If you’re trying to sell a profitable business, there’s a good chance you can find a broker who will work with you.
Do You Have Experience Selling Businesses?
Business brokers essentially act as guides for business owners as they navigate the sales process. Unless you’ve sold businesses before, selling your business can be baffling and time-consuming. And if your buyer has a business broker, there’s a good chance you’ll get swindled. If you want the best possible price, it’s worth getting a broker.
Do You Have a Buyer in Mind?
When you work with a business broker, you’re not just paying for the broker — you’re paying for their network of eager buyers. In this situation, the broker’s fee is more than worth it, as you may not have even found a buyer otherwise.
However, if you already know who you’re selling the business to, you may not need a broker. A good example is if you’re passing your business down to your children. Because you don’t need a broker to find potential buyers and interface with them for you, it might not be necessary to hire one.
Are You Confident in Your Company’s Valuation?
It might seem like a small thing, but one of the most critical services business brokers offer is accurately determining your business’s value. Having a spot-on value is key before you start the sales process.
If you undervalue your business, you’ll potentially miss out on thousands of dollars you’d otherwise see. But if you overvalue it, potential buyers will turn away the second they see the price. Essentially, unless you have a highly accurate valuation already, hiring a business broker is a good idea.
Don’t Miss Out on the Benefits of a Business Broker
In most situations, business brokers can help you in your quest to sell your business at a profit. They can also help you ensure you don’t run afoul of tax laws when reporting the sale, and they can handle the time-consuming work of interfacing and negotiating with potential buyers.
Ultimately, the decision is up to you. Take a close look at your business, determine whether you know any potential buyers, and evaluate your own knowledge about selling a business. You might conclude that you’d benefit from the guidance of a business broker along the way.
Understanding Your Business Is Critical for Business Brokers
Are you selling your business? You likely already know that hiring a business broker can make the difference between a good sale and a great one. However, you shouldn’t hire just any business broker. If you want to get the best sale price possible, it’s imperative that business brokers understand your business. Here’s why.
They Can Get an Accurate Valuation
Easy online valuation calculators can give you a general idea of your business’s worth. But if you want to get a great sale price, you need a highly specific, accurate valuation. Valuing a business is an art, and it takes a skilled business broker to do it. If a business broker doesn’t have a deep understanding of your business and how it works, it will be impossible for them to get the most accurate valuation possible.
They Can Grasp the Value of Intangibles
Profit margins and your balance sheet aren’t the only things that influence your business’s sale price and how a broker markets it. There are many so-called “intangible” factors that you can’t attach a monetary value to — but they still make a difference in the overall worth of your business. Here are some examples:
Customer loyalty
Brand recognition
Goodwill between your business and others
Copyrights or patents
Intangibles can lure in potential buyers, so business brokers should have a solid understanding of the intangibles of your business.
They Have a Feel for Which Buyers Might Be Interested
A good business broker makes it their mission to understand your business, and they take time to understand what buyers want. Selling a business isn’t like selling a car. Buyers usually don’t contact business brokers out of the blue in response to an ad. Instead, brokers maintain a network of interested buyers.
When they understand both your business and their potential buyers, they can nudge promising buyers toward your business and increase your chances of a fast, profitable sale.
They Can Be Unbiased
You know your business better than anyone. However, for business owners — and especially owner-operators — emotions often get in the way, at least to some extent. Even if you think you’re being perfectly objective, there’s a good chance that your emotions are influencing you on a subconscious level.
That’s a natural reaction when you’re selling something that has long been a major part of your life. However, to negotiate a deal effectively, you need someone with an objective view of your business. When a broker takes the time to understand your business and combines that understanding with objectivity, you’ll be well on your way to a successful sale.
Take the Time to Choose the Right Broker
Selling a business is a complex venture, and in virtually every case, it’s beneficial to have a broker. Don’t rush your selection process! Choosing a broker who’s willing to really get to know your business is essential, and it takes a skilled and motivated broker to do that well. With a quality broker by your side, you dramatically increase your chances of a deal that suits you.
6 Ways Business Brokers Can Save You Time and Net Higher Returns
If you’re fielding offers to buy your business or thinking about expanding by buying another business, consider hiring a business broker. Business brokers like Sunbelt Business Brokers can save you time and money by sorting through those offers or finding a business that fits your goals.
After all, you have a business to run. That business is the centerpiece of the deal and should be kept in peak shape to maximize its value and ensure that you have leverage in any transaction.
Business brokers have years of experience negotiating and executing the sales of various enterprises. They can handle your sale or purchase from beginning to end while guaranteeing that you comply with applicable state laws.
Here are half a dozen ways business brokers can save you time and net higher returns.
1. Making Connections
Business brokers have a vast array of business contacts and are intimately familiar with the environment businesses operate in. Having access to these buyers, investors, and others in your industry saves you valuable time and effort.
Through the network of buyers and sellers many business brokers maintain, they can quickly find a buyer or seller that fits your objectives.
2. Advising You Before You Go to Market
The experience business brokers bring to the table also enables them to clarify your objectives and goals or even help you find improvements in your operations that could increase the value of your business, making you better prepared to sell or buy.
3. Valuing Businesses
Among other things, your broker will take stock of your company’s sales figures and competitors, what’s going on in the industry, and what’s important about your market. This ensures that you know exactly how much to ask for your business or pay for another.
4. Marketing Your Business
Making sure buyers and sellers know that you’re looking to buy or sell is essential to the work of business brokers. They know the industry and will create the marketing materials needed to show your business in the best light.
By publishing information about your company, business brokers generate interest among buyers and sellers, helping push the value of your business higher.
5. Maintaining Confidentiality
Through the many years business brokers have handled deals, they know how to keep your business information private. They’ll screen buyers, require non-disclosure agreements (NDAs), and negotiate with discretion. All of this helps protect your business information, your employees, and your customers.
6. Coordinating Logistics
Many professionals will be involved in bringing the transaction to its ultimate close. Business brokers know which professionals are needed — financial advisors, accountants, lenders, attorneys, real estate brokers, and others — and will ensure that all the necessary players are in place to properly complete the deal.
The Advantages of Working With a Broker
Whether you’re looking to retire, move on to another venture, or expand your professional dealings, you naturally want to get the most out of selling your business or buying another one. A business broker can save you time and help you get the highest return possible for your business while you handle the important work of running it.