In part one of this post, we explored how business brokers bring buyers and sellers together, providing the all-important expertise to bring the deal to a conclusion that works for both. Here are some takeaway points specific to each party.
Some points for business buyers
There is no perfect business-only some that are better for you than others. The key is to find the right “opportunity” for you to make it your perfect business.
- A business broker will inventory your skills, interest and experience, as well as your personal and financial goals. This will help match you with business opportunities best suited to your profile and objectives.
- You will want to look at price, terms, income, cash flow and location and be sure the business serves your financial needs. A business broker will help you gather all the necessary information at the appropriate stages. You’ll find that the true value of a business is not always as obvious as the numbers on the spreadsheet.
- Buy the business for a negotiated price with a down payment that works for you. Ensure that the cash flow is enough to cover your financing payments while still leaving you enough money to live on.
- The terms and conditions on the balance due note can be anything that works and is agreeable to both parties.
Some points for sellers
On the flip side our brokerage won’t accept assignments unless we think we can successfully achieve the seller’s objectives. For one thing, the seller’s expectations need to be in line with the market reality.
- The business broker starts by formally assessing the value of the business. This value is not negotiated. From there, we determine the most probable selling price (MPSP). This represents a reasonable price, factoring the true earnings and what the market is willing to pay. The seller can then negotiate on an informed basis.
- A business broker that’s associated with a well-established firm can expose your business opportunity to hundreds of prospective buyers without employees, customers or competitors knowing that the business is for sale.
- Most sellers are unaware of how much interest they can generate by offering financing. To buyers, it’s one indication that sellers are confident that the business will pay for itself
A business broker can:
- provide access to opportunities;
- coach you on the buying process;
- match buyers’ needs, skills and expectations with available business opportunities;
- recast, package and present the business opportunity;
- advise you on market conditions and business valuation;
- structure offers and terms;
- manage negotiations;
- arrange financing;
- recommend experienced professional advisers;
- facilitate the due diligence process and the preparation of closing documents.