Using a business broker provides several benefits for small company owners. The most common benefit is obtaining a better price, and as a result of this higher price, the business broker may often pay for themselves.
Here are four ways a business broker might help you sell your firm for a greater price.
1. Appropriate price
Because business owners are not qualified valuation specialists, they often undervalue the actual value of their company, allowing a clever buyer to receive a “steal of a bargain” without the seller even realizing it.
Unlike selling real estate, selling a company involves several different components. A company’s F&FE (furniture, fixtures, and equipment), inventory, goodwill, non-compete, and accounts receivable and payable are all assets. All of this must be taken into account when deciding the price, not to mention any real estate that may be involved. The ultimate price is determined by the sum of all of these things.
A specialist skilled in values, such as a business broker, knows valuing procedures and how your industry treats each component for the company’s worth.
When defining fair market pricing, several rules of thumb apply depending on your business’s sector. In the insurance sector, for example, a commission component is often used. In other sectors, a profit or revenue component is often used to establish the appropriate market price. Each industry is unique.
Finally, in order to correctly assess the worth, you must examine similar sold firms and their selling prices. This is information that company owners do not have easily accessible, and it is impossible to correctly evaluate a firm without this crucial information.
2. Increased marketing efforts
When sellers decide to sell themselves, they often list their company on one or two business-for-sale websites. A professional broker may utilize up to 300 websites to market the firm, as well as tap into existing buyer lists. This alone may raise the price, particularly when many bids are made on a firm.
Knowing the ideal buyer profile, a well-trained business broker may target the perfect buyer and get a greater price for the firm by pursuing strategic buyers rather than financial buyers.
3. Third-party bargaining
Using a third party to negotiate prices eliminates the emotional component while increasing the price. “Every time you speak about pricing with the buyer, you lose $25k,” one broker advises her clients.
A business broker employs particular bargaining strategies to get the greatest possible price for sellers. Because business brokers are often paid a portion of the selling price, it is in their best interest to get the greatest possible price.
4. Time equals money
The worth of a company is significantly influenced by its profit and sales. When an owner attempts to sell their firm on their own, they divert their attention away from operating the business, and profit and revenue suffer as a result. This lowers the cost of doing business. Using a business broker helps the owner to concentrate on operating the firm and obtaining the best potential selling price.