Buzz Harris: Buyers and sellers have many considerations of one another (voices)

Recently, I wrote about how business brokers can help buyers successfully purchase an existing business. Today, I’ll explain the benefits to an owner of having an experienced broker help them sell their business. One of the big advantages that a competent broker can help a seller with is opening up their business to numerous “qualified” buyers through aggressive marketing. Just like most people do not want to limit the sale of their house or car to one buyer, business owners should not restrict their pool of buyers either.

Notice the emphasis on “qualified.” Experience has shown that about 95 percent of people who want to buy a business do not do so. A broker can distinguish between the 5 percent who are legitimate purchasers and those who are not.

A byproduct of this is that the minutia associated with finding a buyer does not distract the seller’s attention from managing business. Sellers need to remain focused on increasing cash flow to make the business even more attractive. This by itself may be reason enough for a seller to retain a professional broker to represent their interests. A knowledgeable broker will also know how to confidentially market the seller’s business to qualified buyers. This includes local as well as national marketing to prospective purchasers, possibly including targeted competitors, without exposing the seller’s intentions. The broker should be able to confidentially maximize the business’ exposure while eliminating the risk of having employees, competitors and suppliers find out.

Upon deciding to bring in a business broker, sellers need to understand that all brokers are not created equally. Like any partner that sellers bring in, the invited needs to possess a few fundamental characteristics.

One of the basic characteristics is credibility. Because owners sometimes overvalue their business, sellers must be cautious if the broker says he can meet or beat expectations. Be wary of brokers who want an upfront fee. They get owners excited making promises, and then have them write a check before any marketing has even begun.

Sellers also must make sure their broker represents a wide selection of businesses and, even more importantly, make sure they are selling quality businesses. Nothing diminishes a broker’s integrity with buyers faster than a list of unprofitable businesses for sale. A broker must possess experience through a proven track record and should be able to produce a number of referrals. Sellers should ask for referrals that match the business that they are selling. For example, selling a restaurant is very different from selling a manufacturing business.

Finally, if a broker is unable to articulate what makes a successful business transaction to a seller, they’re not likely going to be able to explain it to a buyer.