Why Use a Business Broker?

When a business owner is thinking of selling their business, they are typically advised to utilize the expertise of a business broker. A majority of business owners have little to no experience with selling a business, yet many find themselves questioning whether or not it is worth the price to hire a business broker. Why use a business broker when it is possible to complete the selling process on one’s own?

There are many reasons why using a business broker benefits the seller. An important justification for using a business broker is confidentiality. Leaking the news of a possible sale has the potential to harm the reputation of the business and cause employees to become apprehensive. Without utilizing proper confidentiality practices, it is possible that interested buyers could ruin the entire process and even the value of the business. It can be difficult to list a business for sale without releasing sensitive information, so business brokers can be extremely vital in this sense. The business broker will also have access to an exclusive database of buyers who are legitimate, pre-qualified and not simply tire-kickers.

A second argument for using a business broker is that business owners frequently tend to over or undervalue their companies. With the question “why use a business broker to value my company?” the answer is simple. They have access to industry data that can provide a more complete picture of the business’s true worth and therefore make negotiations more seamless. A business broker can also recast financials in a positive light without deceiving the buyer. If the seller has no experience in recasting financials, they could potentially run into a predicament during the due diligence process and thus lose value.

Business brokers also have strong negotiation skills. They will know when to bend and in which areas they should stay firm. It is important not to compromise everything, but to be open to new ideas during the negotiation process. A business broker is also statistically known to close a sale more quickly than the seller, which lessens the chance of a company decline during the process. Negotiations can become emotional, and the broker acts as a buffer between the buyer and the seller. Post-closing relationships are essential to uphold, and the broker can assist in this as well. Maintaining this rapport is especially important when the sale price is in the form of escrow or seller financing, because it ensures that both parties uphold their end of the deal.

Another strong reason in favor of “why use a business broker” is that many small business owners do not have enough free time to dedicate to the business selling process. A business broker takes the reins in most departments and allows the seller to continue running the business so that it remains profitable and therefore retains its value through to the close.

A business broker can also direct the seller in best practices and refer them to the best firms to partner with in terms of loans, escrow, etc. They are able to perceive the entire package and bring extensive knowledge to the table.

If you would like to speak with a business broker in person to decide further if this is a necessary part of your selling a business process, please contact us at George & Company. We would be happy to help you find the perfect buyer and provide you with all of the above services.