Pros and Cons Of Hiring A Business Broker



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Looking for new opportunities? Planning to retire? Need money? Dozens of reasons exist for selling a business. Making such a decision is tough but often justifiable.

If you’ve decided to sell your business, you want to do it quickly and get as much money for it as possible.

Can you do it alone? Yes. However, you would need to spend a considerable amount of time on research.

The majority of business owners believe that hiring a professional is the smartest way to sell a company. Is it?

In this article, you’ll find out all about the pros and cons of hiring a business broker. This simple 7-minute read can help you figure out if you really need one.

Advantages of Hiring A Business Broker

What are the pros of hiring a business broker to sell your business? You may be surprised at how many of them exist.

Related: Business Broker Agreement Template

1. Excellent Presentation

Have you ever compared an amateur photo with a professional one? Can you tell the difference? No matter how amazing your business is, it’s hard for a non-professional to put it in a pretty package.

Business brokers, just like professional photographers, know how to present your business to the buyer in the most excellent manner possible. These experts know how to turn the negative parts into advantages and highlight advantages in such a way that they appear highly appealing.

Even if you are selling an ideally profitable business, it’s possible to find downsides. Unless presented in the right package, these downsides may upstage the advantages.

Related: Business Sale Presentation Template

2. Simplified Negotiations

How good of a negotiator are you? You may have excellent negotiations skills when it comes to the business you know and love. But do you have an understanding of all the business-selling nuances to make the right move?

Business brokers know how to facilitate the negotiations and turn the conversation in the right direction. A broker researches the needs of the potential buyer and uses this information to get the best deal.

Professional business brokers know far the buyer is ready to go when starting the negotiating. In most cases, they can get a better price for your company that you would on your own.

Related: The Complete Guide to Negotiate a Business Sale

3. High-Quality Teasers and CIMs

Preparing a teaser of your business is one of the most important parts of the sales process. It’s a one or two-page summary of your business that confidentially highlights the benefits of the company. The broker sends it to potential buyers to evaluate their interest in the opportunity.

If the buyers are interested, they sign an NDA (non-disclosure agreement) and get access to the details of your company described in CIM (confidential information memorandum).

Both these documents must be drafted in the most professional manner, using a smart approach to lure the best potential customers in.

Business brokers have substantial experience in creating these documents. If you choose to make them on your own, it’s likely to take a long time.

4. Less Paperwork

Selling a business involves a huge load of paperwork. From NDAs and CIMs to purchase agreements, you would have to study numerous templates and figure out which one suits you the best. Then, you would need to make changes. Again and again.

A business broker has experience with drafting agreements and finding stumbling blocks if any. Such a professional can save you a formidable amount of time while providing an expert opinion.

While you are busy collecting financial, taxation, and legal documents, the broker deals with contracts and agreements.

If you try to work out the entire paperwork on your own, it may take longer than the buyer is ready to wait.

5. Buyer Screening

Numerous buyers may be interested in your business. But you only want to spend time on those who are truly interested in buying. Dealing with buyers, who are "just looking" or buyers with an insufficient budget, who are trying to get the lowest price possible, is time-consuming and overwhelming.

A business broker screens the potential buyers to figure out how likely they are to offer a good deal without wasting your time. They ensure timely NDA signing in order to avoid sharing confidential information with the competition.

6. Good Relationship

Buyers and sellers have to work closely together before and after the deal is signed. You are likely to give the buyer a tour of your business, mediate the contact with your suppliers, explain different nuances, talk about the employees and much more.

Doing all of the above is stressful for the seller, especially when the sale is forced due to unfortunate circumstances rather than desired.

A business broker can simplify the process by taking on some of your responsibilities as a seller when "showing the buyer around". This expert’s job is to maintain a good relationship between you and the buyer.

7. Market Study

When you are selling a business, you need to have an excellent understanding of the market in order to set the right price. Brokers have experience selling businesses on the local market and know what sells and what doesn’t.

By putting the right price tag on your business, a broker can help you sell it faster and avoid questionable offers.

Doing market research on your own is possible but time-consuming. According to an Orlando based business broker, such research doesn’t just involve knowing the market’s condition today. It must include its past fluctuations and possible prospects.

8. Business Database

How do you know where to look for buyers? Selling a business is much more than simply listing it online. You need to know who in your area may be interested in buying your company.

Business brokers have their own buyer databases, which they use to list your businesses in the right place and at the right time. Such professionals are likely to find your target audience much faster than you can do on your own.

9. Saved Time

The most important advantage of hiring a business broker is saved time. Selling a business is a time-consuming process, which is likely to require your attention 24/7. Are you ready to devote all of your time to the sale?

If not, you need some help. A business broker takes care of the majority of your responsibilities during the sale, allowing you to go about your business. No pun intended.

Disadvantages of Hiring A Business Broker

If the first part of this article made you think that you can’t sell a business without a broker, think again. Hiring a business broker comes with a few disadvantages, which must be considered closely.

Related: Selling a Business Without Hiring a Broker

1. High Fees

Yes, you have to pay the broker. The average fee a broker receives is about 8% to 10% of the selling prices. That’s a formidable amount, which you may not be willing to pay for the job you can do for free.

It’s possible to sell a business on your own if you have the time and the nerves to do it. Such an approach can save you thousands of dollars. But, keep in mind that doing so takes up a lot of time.

Related: Plans and Pricing to Sell a Business

2. Hard To Find

A good broker is hard to find. You may spend weeks searching for the perfect candidate. Sometimes, you may need to settle for less-than-ideal services due to the lack of choice in your area.

Working with a mediocre broker can lead to problems along the way. Even though your business is likely to be sold eventually, the process may be unpleasant.

Mediocre brokers focus on selling the business as quickly as possible in order to be paid (brokers are paid when the deal is finalized). This may mean lowering the price to speed up the process.

3. Insufficient Expertise

If you are working in a specialized industry, the broker may know less about the market than you do. In such cases, hiring a broker may not be a good idea. You can do a better job selling a business with the insider’s information, which may take brokers months to collect on their own.

4. Conflict of Interests

When you are selling a business on your own, you have solely your own interests in mind. A broker may be working for the buyer without you knowing about it. Such brokers may seem to be doing their job well, but when it comes to the negotiations, you could suddenly lose the advantage.

5. Inaccurate Information

When you hire a broker, you expect the expert to do all the research and present accurate information. Incompetent brokers can make mistakes. Inaccurate information about the market or the buyers’ potential can affect the sale and botch the deal.

Final Thoughts

If you want to save time, effort, and nerves, it makes sense to hire a business broker to sell your business. However, such a move is only justified if you manage to find a top-notch business broker.

Failure to invest the time in finding the right broker may turn into the disaster at any stage of the sale. If you can’t find a good broker, consider selling the business on your own.

About the Author

Maria has been writing articles for 5 years. She specializes in business and marketing. On her free time she loves to read and write about her travels. You can find her doing this by the beach. She also loves to blog about her marketing experiences for other people to learn from.



Published by ExitAdviser |