Selling your business is likely one of the most important financial transactions you will ever undertake. After pouring your blood, sweat and tears into building your company, you naturally want to get the maximum value when it comes time to sell. This is where working with an experienced business broker can pay huge dividends.
Engaging a professional broker early in the sales process gives you the best chance of selling your business for top dollar. Business brokers are experts in valuing companies, marketing them to qualified buyers and negotiating optimal deal terms. With their guidance and expertise, you are far more likely to exit your business on favorable financial terms.
In this blog post, we will explore the critical role a business broker plays in maximizing the sale price and value of your company. You’ll learn the key reasons why you should hire a broker, when to bring them on board and what steps they will take to get you the highest price. We will also discuss the major benefits of working with a broker versus trying to sell your business on your own.
Read on to learn how putting a broker to work for you can really pay off when it comes time to cash in your chips!
There are several compelling reasons why engaging a professional business broker early in the sales process is essential to maximizing your payday. Some of the top benefits of working with a broker include:
– They are experts at properly valuing businesses, especially in your specific industry. They have intricate knowledge of what drives valuations and key metrics in your vertical. Their valuation expertise can mean tens of thousands if not hundreds of thousands more for your final sale price.
– Brokers have established connections to quality buyers you likely don’t have access to on your own. People that they know are in the market to make acquisitions in your space. Through their extensive networks, they can connect you with motivated buyers that you may never find by yourself.
– They handle the entire sales process from start-to-finish. This saves you an enormous amount of time and operational burden as you continue running your company day-to-day. They take the sales process off your plate so you can remain focused on operating your business.
– They market your business professionally to generate interest among the right prospective buyers. Their compelling marketing materials and tactics generate excitement and get buyers competing for your company. More interest equals higher bids.
– They are expert negotiators that know how to drive up offers and maximize the price. Where you may leave money on the table, they have the skills to push buyers to pay top dollar. Their involvement leads to materially higher final sale prices.
As you can see, there are too many advantages of working with a seasoned broker to ignore. Their years of deal-making experience is invaluable in achieving a successful exit.
To maximize the impact a broker can have, it is ideal to hire one well in advance of when you hope to close a sale. Industry experts recommend bringing a broker on board 6-12 months prior to your desired exit timeline.
This lead time gives them the opportunity to properly prepare your business for sale in ways that boost value. Having a year head start also allows the broker time to find the best potential buyers for your business. You want the deal process to be methodical, not rushed.
Some of the key advantages of hiring a broker well before selling include:
– Time to make operational changes that increase profitability, growth trajectory and otherwise improve the attractiveness of your business to buyers. The broker helps you implement value-boosting changes.
– Opportunity to clean up your balance sheet by paying down debt and optimizing liabilities. This increases the chances of obtaining financing.
– Ability for the broker to thoroughly analyze your financial records including P&L statements, tax returns, sales data and other details. This information informs their valuation.
– Chance for the broker to really understand your business operations, strengths, weaknesses, management structure and more. They can provide suggestions to address any issues.
– Lead time for the broker to create visually appealing marketing materials that frame your business in the best light. Compelling marketing drives buyers to want your company.
– Ample opportunity for the broker to widely promote your business to the most ideal prospective buyers for your company. Casting a wide net leads to more potential bidders.
Hiring a broker with plenty of runway before a projected sale is always recommended if you want to realize maximum value. Avoid waiting until the last minute. It’s also crucial to check the professional license of a business broker; as of this writing, 17 states require having it.
Once you engage a broker, there are a number of steps they will methodically take over the ensuing months to put your company in the best position to sell:
Analyze Your Financial Records
First and foremost, the broker will undertake an exhaustive analysis of your company’s financial records including past tax returns, sales data, profit/loss statements, balance sheet and any projections. This gives them an intimate understanding of the financial condition of your business. It also informs the valuation they will place on your company. If they identify any issues with the financials, they may advise adjustments to increase value.
Provide Suggestions to Improve Profit Margins
Next, based on their financial analysis, the broker may offer suggestions to improve your profit margins in the months leading up to a sale. Even marginal improvements in net profit can add significant value to your asking price. The broker will advise the most impactful ways to reduce operating expenses and boost profitability through pricing, product mix or operational efficiency.
Clean Up the Balance Sheet
The broker will also look for ways to optimize your company’s balance sheet by paying down debt and reducing liabilities. The cleaner your balance sheet, the easier it is for buyers to obtain financing and the higher multiple the business will receive. The broker may even advise bringing in a professional accountant if substantial balance sheet cleanup is needed.
Advise on Business Structure & Management
If your company’s business structure and management hierarchy overly complicate operations or result in inefficiencies, the broker will make recommendations to streamline things. Their experience shows them what organizational structures are off-putting to buyers. Simple, lean structures are most attractive.
Create Marketing Materials & Promote to Buyers
Once the broker has optimized business operations, profitability and financials, they will begin creating visually appealing marketing materials. This includes an offering memorandum, sales decks, financial projections and more. The broker will then aggressively and professionally promote your business to qualified prospective buyers they believe could be good fits. Using their deep networks, they will cast a wide net and leave no stone unturned in generating buyer interest. Their promotions establish your business as an appealing acquisition opportunity that buyers will compete for.
Manage Sales Process & Negotiations
When quality prospective buyers emerge, the broker will manage the sales process from initial outreach through due diligence, final negotiations and closing. Their skills here are invaluable, from maintaining enthusiasm among buyers to tactfully negotiating back and forth to drive up the final bids. The broker serves as an intermediary so you can focus your energies on operating your company. Their finesse and perseverance takes the stress out of the sales process while maximizing your payoff.
Now that you understand the pivotal role an experienced broker plays in maximizing your chances of selling at a premium valuation, let’s recap the major benefits of partnering with one:
– Much higher likelihood of selling your business within your desired timeframe. The seasoned broker has the industry connections and sales skills to generate meaningful buyer interest.
– Alleviates an enormous burden on you operationally. The broker quarterbacking the entire sales process means you can continue devoting your full energies to running your company day-to-day.
– Multiple interested buyers leads to higher offers. With the broker aggressively marketing to qualified prospects, you have a greater chance of interested parties competing with bids.
– Smoother overall sales process and negotiations. With the broker serving as an intermediary, negotiations and due diligence goes more smoothly. They work to keep the process on track and terms favorable.
– Command the maximum price. At the end of the day, the broker’s guidance, expertise and connections lead to higher final sale price and improved deal terms. Their involvement pays dividends.
Having an experienced M&A advisor in your corner is truly the best way to ensure you walk away from selling your business with a life-changing outcome. Don’t leave money on the table by trying to tackle the sales process on your own. Bring in a broker around 12 months before you hope to transact so they can meticulously prepare your company for sale and run a robust marketing process.
The months spent optimizing your operations and balance sheet, creating promotional materials and identifying quality buyers will pay for itself many times over in the final sales price. Pay the 5-15% commission gladly, knowing the broker will have earned every penny based on the premium value realized.
Work with your financial and legal advisors to carefully vet brokers with solid references who have successfully sold companies in your industry. Schedule calls with a few brokers before committing. The right broker partner dramatically improves your odds of selling your business for top dollar at the optimal time. That makes bringing them on board well in advance an easy decision!
Selling your business is the fulfillment of your life’s work as an entrepreneur. To achieve the rewarding windfall you deserve for all your effort and sacrifice, surrounding yourself with the right team is imperative. And there may be no more important advisor than an experienced business broker. Their expertise, connections and rigor in running the deal process is invaluable.
Hopefully this article has demonstrated why engaging a broker at least 6-12 months prior to selling makes tremendous sense. Their financial analysis, operational recommendations and professional marketing services can boost your company’s value substantially. Just as important, letting the broker handle negotiations and due diligence takes you out of the daily sales grind. This frees you up to remain laser focused on operating your business right up until the joyous day you sign on the dotted line.
To recap, a broker helps you sell your business in the following key ways:
– Obtain an optimal valuation through their financial modeling and industry comparables
– Maximize net profit leading up to sale by optimizing pricing and expenses
– Enhance balance sheet by reducing debt prior to the transaction
– Streamline business structure and operations to improve appeal to buyers
– Create compelling marketing materials that attract serious buyers
– Utilize their networks to connect with buyers that may not otherwise find you
– Manage the arduous sale process from initial outreach through close
– Use their savvy negotiation tact to drive up the final offers
If selling your business for maximum value is your goal, few investments make as much sense as hiring a top brokerage firm. Do your research now before time runs short. An experienced M&A advisor is primed to pay dividends and help you achieve the rewarding payday you have worked so hard for.