Should You Sell Your Business With A Broker?

Should You Sell Your Business With A Broker?

Selling my business on my own or through a broker? Find out which is better for you by reading on.


Many owners have struggled over the last year to decide whether to work with a broker. It is also common for clients to wonder how to reduce brokerage fees if they are committed to working with a broker. Those experiences led us to write this guide for business owners considering selling their businesses through brokers.


Possibly you want a change, are retiring, or are in need of some extra cash. Small businesses are sold for a variety of reasons, but the goal is often the same: to get as much money as possible for the company.

It can however be difficult and even costly to sell a small business. The average time it takes for a business to sell is six to nine months, and most don't sell. In addition to that, 80-90% of the net worth of business owners is tied to their businesses.

Whether to hire a broker or go it alone is a key question you may be wondering before starting the process. A business broker may be the right choice for you depending on your specific circumstances, but this guide will explain the pros and cons of using one.


Business brokers: who are they?


It's important to understand who a business broker is and what they do before we discuss the advantages and disadvantages of using one.

Businesses brokers help you sell your business for the right price. Among the services they provide are:

    Providing financial documentation and information

    Understanding your business valuation

    Getting your small business noticed

    Handling all buyer inquiries and contract negotiations

    Process management for due diligence

    Facilitating the closing process

    Resolve any outstanding issues throughout the process

    There are different fee structures for different business brokers. Commissions, monthly retainers, and valuation fees are common fees.

    The success fee charged by most business brokers is usually between 5%-15%. Monthly retainers and upfront fees are also common. It is reasonable to assume that brokers who charge high commissions are usually more motivated to close deals in order to get their share of the money.

    Here are a few reasons why you should use a business broker to help you


    EXPERTISE IN THE SALE OF BUSINESS

    An expert business broker is skilled at selling businesses, not at running them. Businesses are sold in various industries and markets, and most business brokers have the experience to evaluate and sell them.

    The business broker may have subject area knowledge of the legal structure and operations of a specific industry, especially if that industry is specialized. It would be ideal if they were familiar with the niche you are selling or if they have some experience selling small businesses like yours.

    brokers are required to be licensed in over one-third of US states, adding yet another level of certification and expertise to their work. A business broker may also hold the following accreditations:

    • CBI (Certified Business Intermediary)

    • M&AMI (Mergers and Acquisitions Master Intermediary)

    • Certified Mergers and Acquisitions Professional (CMAP)

      A broker's dedication to their job can be demonstrated by these extra credentials, even if they are not required.

      PROFESSIONAL MARKETING SERVICES AVAILABLE

      Your business broker will aid you in developing the best marketing strategy to reach buyers and present your small business in the most favorable light possible. Your business's purchase price will increase if you have more buyers competing to buy it.

      You can more easily place your business in front of the right buyer by working with a business broker who has access to a pool of prospective buyers. Your small business will be marketed to targeted buyers using a variety of tools, including listing websites. Buyers are sourced by some business brokers through listings, while others approach buyers directly or through their networks.


      FINDING REAL QUALIFIED BUYERS AND CREATING COMPETITION

      The business you own is often your livelihood for many owners. Your small business deserves a fair price - but if you price it too high, you may not be able to

      Businesses' valuations can often be a difficult process for small business owners, because these calculations depend on many variables, including the business' assets and seller discretionary earnings (SDEs). By using pricing strategies that are appropriate for your business' value and appealing to potential buyers, business brokers can help you determine the value and price of your business accurately.

      Your business broker may offer suggestions for improving your small business before sale to increase its value. As a result of market research, they will also be more knowledgeable about what is happening in your particular market, and they may be able to provide you with forecasts so that your sale timing may be more effective.

      By screening out those who are just "looking around" or not within your price range, business brokers can separate the serious buyers from those that aren't worth your time. Additionally, business brokers can protect the sale from disclosure by negotiating non-disclosure agreements with potential buyers.


      KNOWING THE IMPLICATIONS OF TAXATION

      When a business is sold, capital gains tax is usually triggered - and how your business is structured can influence how much profit you receive. Keeping up with tax code changes is one of the responsibilities of a business broker. Choosing the right structure for your small business will ensure that you pay the least amount of taxes.

      Also, they will help you gather the relevant documents for a successful sale from your tax returns.


      STREAMLINING THE PROCESS

      A broker can help you organize your documents and get the correct ones. You won't have to worry about additional requests for information since they'll handle them for you.

      Additionally, a business broker can assist with outreach and sourcing so that you can quickly assemble a high-quality team. In order to make the process go as smoothly as possible, they will utilize their connections and third-party relationships. The business broker can connect you with experienced attorneys, bankers, and accountants who can facilitate a successful sale of your business, reducing the time spent shopping around for the right individual. Many brokers know which Small Business Administration banks lend, and can provide you with access to them.


      NEGOTIATION EXPERIENCE

      When it comes to business sales, you're an expert negotiator because it's not something you'll do every day. A person's behavior and judgment can also be affected by stress and personal emotions.

      Business brokers can handle the negotiations for you, so you don't have to waste time and energy haggling. For an unbiased assessment of your business, they can also access recent sales histories in your industry.

      In addition to facilitating negotiations, brokers can conduct background research on prospective buyers to ensure you're getting the best price possible.



      TIME EFFICIENT

      As a full-time job, running a business takes a lot of time - and many owners don't have the time to create listings, field inquiries, and negotiate with potential buyers, let alone gather all the paperwork and documentation needed to finalize the sale.

      During the due diligence process, the buyer requests documents, data, and other information to examine for liabilities or roadblocks to the transaction. The business broker will assist you in assembling all of the documentation you need for the sale, including financial records. You'll save time and headaches by allowing them to handle any last-minute requests.

      You can focus on running your business when you use a business broker.


      Business brokers aren't for everyone


      A business broker has many benefits, but there are a few reasons why you may not want to hire one. Small business owners should be aware of a few reasons why they shouldn't use a business broker.

      Alternatively, you can partner with experienced professionals such as accountants and lawyers to support a business sale without using a business broker.


      SELLING BUSINESSES IS SOMETHING YOU'VE DONE FIRSTHAND

      You might be confident that you can handle this alone since this isn't your first rodeo. If you go through the process on your own, you'll save money and time. You will end up paying yet another cost, one that will eat away at your hard-earned sale profit.


      YOUR BUSINESS IS BEING SOLD TO A FAMILY MEMBER OR EMPLOYEE

      Finding the right buyer is a large part of the job of a business broker. An employee or family member with an agreed price may be better than using a broker if you already have a buyer in mind.

      As you do your due diligence, provide documentation, conduct due diligence, and handle any tax consequences, you'll still be responsible for much of the legwork. An experienced lawyer may, however, be able to help.


      A NETWORK OF PROFESSIONALS THAT SELL BUSINESSES HAS BEEN ESTABLISHED

      In addition to connecting you with other professionals, such as attorneys and accountants, a business broker can also provide you with advice. You may not need the expertise of a business broker if you already have established relationships in your professional network, or if you work with other professionals who have experience selling businesses.


      BROKER FEES ARE SOMETHING YOU WANT TO AVOID

      Using a broker means paying broker fees, which is pretty much unavoidable. There is often a high commission fee associated with these transactions. You would have to pay $50,000 alone in broker fees if your business was sold for $500,000 and your broker took 10%.

      It may not be worth it to use a broker for some owners, so they save many thousands of dollars by selling their businesses themselves instead.


      INCENTIVE MISALIGNMENT

      Brokers are more concerned with selling your business fast than doing it at a profitable price. When it comes to selling your business successfully, others have different priorities than you do. A broker who understands your industry may be difficult to find if you are in a specialized industry.

      Selling a business requires the right information, so a broker with incomplete knowledge could hamper your sale and lower the price.

      YOU DON’T WANT TO LOSE CONTROL OF THE PROCESS

      Brokers are more concerned with selling your business fast than doing it at a profitable price. When it comes to selling your business successfully, others have different priorities than you do. A broker who understands your industry may be difficult to find if you are in a specialized industry.

      Selling a business requires the right information, so a broker with incomplete knowledge could hamper your sale and lower the price.


      If you want to sell your business without a broker I highly recommend you to ready this where we've discussed marketplaces for business.

    Comments (23)

    • Sara Cron
      Sara Cron
      12, May 2023 Reply

      Deciding to sell your business is a significant step, and it's important to consider all the options available to ensure a successful and smooth transaction. When it comes to selling a business and acquiring leads for MCA, working with a broker can be a game-changer. Selling a business involves various complex processes, from valuation and marketing to negotiating deals and handling legalities. A broker specializing in MCA leads can navigate these intricacies with expertise, saving you time and effort while maximizing the value of your business.

    • Creative Media House
      Creative Media House
      02, Jan 2023 Reply

      Informative content!
      We have saved this website for future reference in order to obtain beneficial writing.
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    • Bryans Multi Services
      Bryans Multi Services
      16, Dec 2022 Reply

      thanks

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