 2a) Business Transfer Brokers A business transfer broker is a person that will be very helpful towards selling your business and although some sellers do not use them, if you are a first time seller, they can be an essential ingredient. Before you use a broker, it is important that you recognise whether it will be beneficial: brokers usually charge an initial fee paid upfront and a 10% cut of the final sale price, paid when the deal is closed. A business broker acts just like an agent and makes it their personal responsibility to sell your business using their own marketing methods. As well as finding potential buyers, they can be used to value your business, settle negotiations, and those that are highly experienced and qualified, can often obtain a higher selling price. Potential buyers will also feel more at ease speaking to brokers (at first) then they would directly to the owner and by doing so, it allows you the time to continue running the business.
Further, brokers will provide confidentiality (detailed later) about your will to sell the business, saving you the hassle and grief that may result from customers and suppliers: spreading the news too early can affect your competitive position. Some brokers may have relations with larger companies that may see your business as a perfect acquisition to expand their business and consequently, you could be paid an amount higher than you expected. If your business is worth a considerable amount of money, say, over £100k, then a business broker should definitely be used as they may be able to sell the business for more, as an incentive to receive a higher payout. If your business is worth, say, less than £100k, it is debateable that using a broker is worthwhile. If they can sell your business for, say, £10k more than the asking price, then it would be worthwhile because you get more money and you can pay the broker to do all the hard work as well (as shown in the right hand column of the example below). Example: Estimated Value | £50,000 | | Estimated Value | £50,000 | Actual Selling Price | £50,000 | Actual Selling Price | £60,000 | Brokers Fee @ 10% | (£5,000) | Brokers Fee @ 10% | (£6,000) | Total Earnings | £45,000 | Total Earnings | £54,000 |
Business brokers can be found in pubic listings such as the Yellow Pages, or through adverts in business newspapers and magazines. Arguably, the best way to find a respected broker is through a referral by fellow professionals such as accountants, solicitors and even by word-of-mouth (from people that have previously used a broker). However you choose to find a broker, you should determine that they are the most qualified and experienced that you can find. A contract will be settled between yourself and the broker (or brokerage firm) so it is important that you revise the terms and conditions so that you are not faced with unexpected issues during any time of the selling process. Remember, you are practically employing the broker and so terms and conditions should be largely favourable to yourself. More importantly, if you are not happy with your broker at any time- find a new one, considering it does not break the terms and conditions in the contract. If you decide against the use of a business broker, you should at least consult a solicitor to assist with selling your business. 2b) Why Not Sell the Business Myself? For businesses that are considered less than around £100k in value, it is common for the owner to sell the business themselves without the use of any professional assistance. For some owners, they may have been through the selling process many times before and therefore have developed the knowledge to successfully sell the business themselves. Another common reason why people go through it alone is purely down to the expense of using the assistance of professionals. We have already advised that you use the assistance of professionals to help sell your business, but before you make a decision to sell the business yourself, consider the following points: Do you have the required skills and knowledge in the fields of accounting, law, taxes, marketing, and more importantly, negotiating? Do you have the time to find, contact and liaise with potential buyers that are serious about buying your particular business? Can you provide the confidentiality that you need to prevent damaging your competitiveness? If your staff and suppliers find out that you are selling up, you may find this will affect your current trading ability. Do you have any experience in selling a business? Can you remain cool and patient when a buyer is trying to negotiate a lower price, particularly if their objectives are the complete reverse of yours?
Article Index
|
