Selling a Business – Using a Business Broker

When selling a business the most important consideration for most sellers is how to achieve the best price for that business and the most favourable settlement terms.

Once the decision is made to sell the business, confidentiality is often of vital importance. A seller does not want competitors or suppliers knowing his plans and using that information against him with his customers. Also staff tend to become very unsettled when they hear of a plan to sell. It is important for the process that staff are stable and comfortable for a new owner because they are an important asset to the business. This is an important consideration because the sale process is very vulnerable to outside influences that can unsettle a buyer.

What will I get for my business is a critical question which will frequently decide on the course of action the seller takes. Experienced business brokers can offer guidance to a seller in terms of what the market is likely to pay for a business at a given time. The market value of different categories of businesses changes from time to time. Timing therefore is always a factor in optimising a business price.

Having made the decision to go to the market the owner needs to make the understanding and transparency of the business as simple as possible. There are a number of business brokers that can work with the sellers and their accountants to present the business in the most appropriate way, including identifying abnormal and non-recurring costs and personal drawings items. The identification of these adjustments and the decision in terms of what to include is important to the credibility of the figures presented. This presentation is critical if the process is to succeed.

A business broker will normally guide a seller on how to prepare and document the operating procedures of the business. This is an important area because a potential buyer will probably not proceed if they cannot see how they would operate the business should they buy it. Documented procedures can allay those concerns. In recent times, a number of business sales have stalled because the potential buyer could not see how he would operate the business from the information provided.

The information memorandum or business profile is a document prepared by a business broker. This document is prepared in conjunction with the business owner and contains: The background of the business and highlights opportunities going forward. It also gives a reason for the sale. The document also contains the financials, the plant and equipment list and any other assets that are part of the sale. This document needs to provide sufficient information to a prospective buyer for them to decide whether to go forward or not. It is therefore important that a lot of care be given to its preparation.

An intermediary such as a business broker will be the best one to prepare and evaluate this business profile.