What Is The Purpose Of A Business Broker?
Looking to sell your business? A business broker can help.
What they do can be a bit of a mystery to people—that’s because business brokers do a lot. From helping you find prospective buyers to navigating through the legal and financial process of selling your business, they take care of almost every element of the business sales process.
Here’s what a business broker does!
Understanding the Market
Business markets are incredibly complex. A business broker needs to know:
How long businesses of a certain type and value are staying on the market
How much lenders like the Business Development Bank of Canada (BDC) are willing to loan prospective buyers for businesses of different types, and at what rates
The recent sale prices of businesses like yours
The rules and regulations governing your market
And more!
To handle these complexities, business brokers generally specialize in certain locations and business values. Jason Brice, for example, specializes in Main Street businesses (those valued at $10 million or lower) in British Columbia.
By understanding the market, a business broker can help you navigate legal and financial frameworks, all while giving you a detailed assessment of how quickly your business might sell, the best time to sell, and more.
Determining the Value of a Business
There are several different methods and techniques used to determine the value of a business. A great business broker will know a number of these techniques and apply them to give you a fair assessment of the market value of your business.
A great business broker will know which techniques to apply when determining the value of your business.
Naturally, most business owners might be inclined to list the highest valuation possible for their business; this is sometimes a mistake. A lower business valuation can bring in more interested buyers more quickly—a great move if you’re trying to sell your business expediently or have specific criteria for the types of buyers you’re looking for.
Negotiation Skills
You won’t be surprised to learn that negotiation skills are one of the most important parts of a business broker’s skill set. There are a few reasons why you’ll want to take advantage of your business broker’s role as a shrewd negotiator:
They don’t have the same emotional stake in the business—that means they can negotiate based on the facts, the market, and the value of your business.
They’ve negotiated business deals for businesses like yours. They won’t bend to pressure and will negotiate within a range of prices that make sense to you.
They’ll use a variety of techniques like vendor take-backs and earn-outs in order to ensure you get the most money possible for your business.
Negotiating on your own can be challenging. When you’ve built a business from your own blood, sweat, and tears, it can be hard to take a step back and handle negotiations objectively. A business broker will help you get more money for your business more quickly through negotiations.
Your business broker will also take a variety of steps before negotiations even begin to protect the integrity of a sale. They’ll vet potential buyers and ensure that sensitive information isn’t disclosed.
When rumours about business sales reach team members, competitors, and the market, you can lose your footing in negotiations. Business brokers use a variety of marketing and legal techniques to prevent this from happening.
Access to a Network of Prospective Buyers
Business brokers meet a lot of people over the course of their careers: People who have bought businesses from them, sold businesses with them, met them at conferences, and more. These contacts are often extremely reliable and can be found across a variety of different industries.
Selling a business isn’t like selling a house—the market is much more narrow, and the people who will be most interested in buying your business are those with experience in your industry. A huge number of sales conducted through business brokers happen because they have a network of buyers actively asking them for leads. A good business broker will find the most qualified buyers to advertise to.
Managing the Transaction for the Business Owner
Selling a business is an extremely complicated proposition. You need to ensure confidentiality, go through due diligence, send a letter of intent, move through the sale in stages, and eventually transfer ownership. Lawyers, accountants, and a wide variety of other professionals are involved—including business brokers.
An experienced business broker can help smooth over every element of this transaction. They’ll help coordinate between all parties and keep you informed as the process moves along. Your broker will help you understand how quickly the process will move along, ensure that you’ve got all the necessary documents together, and more.
What Sets Successful Business Brokers Apart From the Others?
There are a number of factors that can set a business broker apart:
The quantity and quality of their contacts
Their level of experience
The industry and types of businesses they sell
Their knowledge of the market
Their negotiation skills
How well they’ve established themselves within a particular niche
You should ask your broker about all of the above—most of the time, the broker you’re talking to will be more than glad to tell you about the qualities that set them apart.
Finding the Right Broker To Sell Your Business
Finding an experienced broker who has sold businesses like yours in the past is a great start. It’s important to remember that a broker who is successful in one niche may not be the right broker for you. Your best bet is to talk to your prospective broker—tell them about your business, your needs, and your plans to sell your business.
With that information, your broker will be able to assess whether or not you’re a good match. They’ll tell you about their experience, and you’ll be able to make the same assessments.
Looking for a Vancouver business broker? Call Jason Brice. He has years of experience selling businesses in Vancouver across a wide number of different industries—he can help you sell your business.