Should I sell my business through a broker?

7 Jan 2022

Selling your business is a big decision. It’s an exciting step but can be daunting. Some owners may have an exit strategy in place, but many aren’t sure where to start.

A DIY sale might be right in certain situations, but most people choose to engage a broker when selling their company. Using a broker gives you a far greater chance of finding a buyer and usually results in a higher sale price.

This article explains the role of the broker and how they can help you achieve the best outcome when selling your business.

The broker’s role

Most people think that a broker’s job begins and ends with finding a buyer. While this is an important element of the role, it’s a small part of what they do. A good broker should assist you in preparing your business for sale, guiding you through the sale process, and ensuring that you get the best deal possible. We’ve broken down some of the key areas where a broker will add value.

Expertise in valuation

Setting a realistic price is a key when selling your business. Naturally, you will want to achieve the highest price possible but if it’s unrealistic buyers will simply pass on the opportunity.

Brokers talk to buyers all the time. They are aware of market trends and know what similar businesses are selling for. They are extremely well placed to advise you on what the right price point should be. Most brokers work on a commission basis so it will be in their interest to achieve the best price for you too.

Creating effective marketing collateral

While business owners know their company intimately, they aren’t always the best people to produce sales literature. They often add too much operational detail and fail to highlight the key information buyers are looking for. This makes it hard to generate interest.

Brokers, on the other hand, frequently work with buyers. They know exactly what buyers are searching for, how much information to include, and what language to use. Having a broker produce a professional set of sales literature for your business will increase your chances of finding a buyer and save you time.

Advertising your company

There are plenty of online marketplaces to advertise your business for sale. Listing fees typically range from £750 to £3500. However, the leads generated are often low quality and unvetted.

Although brokers will likely promote your business through some of the same channels to reach a wider market, serious buyers usually come from inside their network. Brokers will vet all prospective buyers, so you aren’t wasting your time with unqualified leads.

Advertising via a broker is usually included in their fee and increases your chances of finding the right buyer and closing the deal.

Maintaining confidentiality

When it comes to marketing your company, you want to reach a wide audience. However, you will likely want to avoid informing employees, suppliers, or competitors too soon. Using a broker makes it much easier to market your company anonymously.

Brokers will produce adverts and teaser documents to gauge initial interest without revealing the business identity. They will screen interested parties before disclosing sensitive information and only do so with your approval.

Brokers know what documents need to be put in place to protect you and the business to ensure the transaction remains private, which should give the seller peace of mind.

Running a formal process

Running a strategic sale process through a broker will almost always result in more offers and a better sale price. The process is designed to create competition and tease out the best offers.

Brokers will advise you on when an offer is good versus when you should push back. This can be a hard call so having a market expert to guide you is invaluable.

According to data from some of the largest brokers, businesses sold via a broker achieve a sale price between 10-20% higher than those sold direct. Broker fees vary but the higher sale price alone usually outweighs the fees charged.

Negotiating

Brokers are knowledgeable about the market and well-versed in deal structures. Because they are one step removed from the deal, they are less susceptible to pressure tactics and are less likely to succumb to emotions. Having a broker guide you through the negotiation process will help you secure a much more favourable deal.

Helping you avoid pitfalls

Brokers specialise in selling businesses. They know what to expect throughout the process and can help you avoid costly mistakes. Whether it’s helping you avoid a costly legal bill or giving you clarity on a dubious contract clause, you’ll be pleased to have someone who knows what’s their doing fighting your corner.

Keep your eye on the ball

The time, energy, and attention you save by hiring a broker is one of the most underappreciated benefits. The time it takes to prepare documents, liaise with advisors, evaluate leads, answer enquiries, and keep multiple buyers engaged is underestimated.

The sale process can often take around 12 months and the distraction can negatively impact your businesses. Having a broker handle the sale means you can focus on keeping the business running smoothly, which will make it easier to sell and get the best price.

When not to use a broker

Sometimes selling direct does make sense. If you run a smaller, lifestyle business (i.e 75% of the money is earned by you), a broker is unlikely to bring much value. Selling the business to an associate or local clinician willing to take on the challenge of clinic ownership may be your best option. Additionally, a pre-arranged sale to a family member won’t benefit from a full broker service, although a formal valuation may be useful.

Final thoughts

For most business owners, the benefits of using a broker will vastly outweigh the cost. However, like every profession, not all brokers are created equal. It’s important to find the right person to sell your business. Do your research, check they have industry experience, make sure they are committed, and, if possible, seek a reference.

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