By whatever name, Business Intermediary, Business Broker, Mergers and Acquisitions Agent, Investment Banker or Transfer Agent, the right representation can make the difference between closing and losing a deal. Due to confidentiality, a Business Intermediary cannot simply place a sign in a window like a real estate broker and wait for a prospective buyer to call. Selling a business takes a lot of effort and time. Think of a business broker as dedicated project manager who has to prospect for buyers under a cloak of secrecy and ensure confidentiality throughout the entire business transfer process. A professional Business Intermediary can find financially capable prospects, negotiate the deal, and set up closing without anyone finding out until the deal is done. Find out why you should choose the The Vant Group.
Pricing a business - Buyer prospecting
- Confidentiality
- Negotiating a better deal
- Professional marketing program
- The closing process
- Handling the support team
- Time Consuming
- Summary of Business Intermediary services
1. Pricing a business
If you have a buyer, what technique will you use to establish price? Even if a price has been agreed upon by the buyer and seller, how can you, as a seller be sure the price you have agreed to is the highest justifiable price or the price that enables you, as a seller, to receive the highest price the market will pay without leaving money on the table? A competent Business Intermediary should be able to arrive at this price after a close financial analysis of your company. Business Intermediaries will determine this figure in conjunction with your CPA and a thorough market analysis. Having a business on the market with too high a sale price will ultimately frighten prospective buyers, while under-pricing a business could cost you money. A Business Intermediary can assist you in determining the best price for taking a business to the market.
There are several skill sets that a professional Business Intermediary introduces to ensure that a seller obtains the highest price for a business. Evaluation experience, market awareness, and knowledge of deal structure are a few of these skills. A Business Intermediary sells businesses in the marketplace daily and is current with overall supply and demand. No other professional is in this position. It is important that to use everyone on a support team for their specific area of expertise. Refer to your attorney to draft legal documents, your CPA for his tax advice, and your broker to guide you through the business transfer process.
2. Buyer prospecting
Once a business owner has decided to sell his business and all the pertinent documents have been prepared, how will prospective buyers find out about the business and how can the seller be assured the buyers are capable? A majority of people in the United States has thought about owning their own business, but only a small percentage ever does. When a business becomes available for sale, the most strenuous step is pre-qualifying prospective buyers. On average, for every one (1) buyer introduced to a business owner as a prospective buyer, we have usually met with between 10-30 prospects. Many prospective buyers do not have the financial resources, are not a good fit, or are just “window shopping.” A Business Intermediary will act as a buffer and allow you to concentrate on running your business rather than wasting your valuable time parading unqualified buyers through your business.
3. Confidentiality
Preserving confidentiality is one of the main reasons to hire a Business Intermediary. A professional Business Intermediary will have variations of confidentiality agreements already drawn up and is familiar with how to effectively administer this important document. Most Business Intermediaries will not discuss a business with a perspective buyer unless a confidentiality agreement has been signed. To further ensure confidentiality, a financial statement from the buyer will often be required at the same time the confidentiality agreement is signed. The idea is that if a prospect signs both a confidentiality agreement and gives his financial statement, he will most likely adhere to confidentiality and not just test the proverbial waters. By taking these measures in the beginning, confidentiality is insured by eliminating the “tire-kickers” before a company name or location is given.
4. Negotiating a better deal
A business owner is emotionally tied to his business, negotiating on emotion rather than reason. A Business Intermediary can negotiate the best deal for the owner because he is not intimately connected with to the business, but operates in the owner’s best interest. A business broker has dealt with many business transfers and is aware of all the nuances involved. He foresees problems and deals with them, while a business owner going through the process for the first time could lose a deal because of lack of experience.
5. Professional marketing program
As an experienced business owner, you definitely know how to run a successful entity and make it grow. When you are ready to sell, the “nuts and bolts” of your business have to be presented in the most succinct and positive manner in order to entice prospective buyers to consider your business as an acquisition candidate. A Business Intermediary is skilled at preparing concise, informative marketing packages on businesses he represents. After a package has been prepared, the word still needs to get out. Without a proper marketing campaign an otherwise stellar business may go unnoticed. Business Intermediaries have the resources available at their fingertips to advertise a business with the highest confidentiality and maximum exposure.
Most Business Intermediaries will search their internal database for pre-qualified buyers to find a match for your business. If no match is found, Business Intermediary will use marketing mediums such as newspaper, internet, trade publications, and other business brokerage firms until the right buyer is discovered. Even though a Business Intermediary utilizes an enormous amount of time, effort and money to market a business, it is a fraction of what an owner would expend. A Business Intermediary knows the quickest, most effective methods of reaching the buying masses, while preserving confidentiality.
6. The closing process
The closing process is usually the most strenuous and nervous step for all parties involved. An experienced Business Intermediary will have experience working with closing attorneys or the escrow companies. He will be able to handle the problems that arise with attorneys or the escrow company. The Business Intermediary along with the closer will ensure that your interest is protected and ensure the deal closes.
7. Handling the support team
We have previously mentioned that you will have a support team in place to facilitate a smooth transfer. Your CPA, attorney, broker, lender, comptroller, and others will be needed in the process. It is imperative to have a point person to coordinate the team. That person should be your Business Intermediary. Using a Business Intermediary to sell your business will alleviate the time constraints involved in coordinating your support team. Most importantly, no one on your team will have the experience that a Business Intermediary has throughout the process. Members of the team might specialize in certain areas, however the business broker is the only one whose job is to facilitate and coordinate the entire process.
8. Time Consuming
Selling a business can take hundreds of hours of dedicated time which will keep you from doing what you do best; running your business. If you go through the process alone, the amount of time the process would take you away from your business could have tangible negative effects.
9. Summary of Business Intermediary services
Following is a list of services that a qualified Business Intermediary provides during the business transfer process:
- Consultation with seller and review of seller’s documentation
- Review of seller’s financial statements
- Performing a market analysis
- Preparation of a listing agreement, seller’s disclosure and seller file
- Development of marketing plan and marketing package
- Preparation & submission of advertising
- Initial buyer response, interview, and screening
- Business showings and buyer follow-up
- Additional consultations with buyer/seller
- Assisting buyer with preparation of Offer to Purchase or Letter of Intent and presentation to seller
- Offer follow-up with buyer/seller
- Meetings with buyer/seller to coordinate buyer due diligence
- Consultations with buyer/seller and outside advisors
- Coordination of closing and other documentations
- Consultation with parties regarding transfer of licenses, utilities, etc.
- Attending the closing and subsequent transfer of the business
