When it’s time to sell your business, a savvy broker can get you the best deal. Here’s what you need to know.
There may come a time when you decide to sell the business that you’ve built and nurtured, and you no doubt want the highest possible price for all your years of blood, sweat equity and tears. You were savvy enough to partner with the right people to build your business; make sure to do the same when you sell it. The best way to do that is to work with an experienced business broker who specializes in selling businesses.
A good business broker can and should be able to sell your business for 20-40 percent more than you could on your own, according to Michelle Seiler-Tucker, president and founder of Better Business Brokers and author of “Sell Your Business for More Than It’s Worth.” In an article at Small Business Computing, Seiler-Tucker defines a good business broker as someone who, in addition to managing the listing, expertly evaluates a business, knows the market, and connects with buyers.
There are two sides to vetting business brokers. Questions that you should ask them and the questions they should ask you. When you interview prospective brokers, they should be able to easily answer the following questions:
- How long have you been selling businesses?
- How many businesses have you sold and in which industries?
- Do you have any testimonials?
- How do you find, locate and qualify buyers?
- What is your closing ratio?
You can tell a lot about a business broker by the questions they’ll ask about your business. Most importantly, what they ask will show whether or not they have a serious interest in selling your business. According to Seiler-Tucker, the following questions will also let you know what qualities prospective buyers look for in a small business.
How’s the Company Brand?
The more your brand resonates with customers, the better your company looks to prospective buyers, and that increases your chances for a good sale price. A smart business broker will ascertain whether your company has location loyalty or brand loyalty. And when it comes to selling a business, brand loyalty wins every time.
Are You the Business?
If you run a small concern with “few to no employees,” Seiler-Tucker says that buyers may not bite. Why? Once you and your expertise walk out the door, so does the business. Prospective buyers want to buy an entire business, not a profession.
How Deep is Your Customer Base?
Prospective buyers want a healthy roster of customers, and who can blame them? If your company’s revenue depends on a couple of clients, it puts your bottom line at risk in the event that one or two walk out the door. You’re much better off (whether selling a business or not) with a diversified clientele. Seiler-Tucker says a solid customer base helps prospects feel like they’re “buying a good, solid business with excellent branding.”
Do you Have Multiple Revenue Streams?
Buyers want to buy a profitable business that has more than one way to make money. Tough times can dry up a profit stream, so having another source or two can carry a business through periods of market instability. For example, a buyer may prefer an air conditioning and heating specialist that also offers facilities maintenance services.
Is Your Business Fiscally Fit?
Before selling your business, Seiler-Tucker recommends that you put your business through a total “financial housecleaning.” It’s not enough to have money in the bank and a healthy source of income if your books are a mess and you can’t show how your profit came to be. Prospective buyers will take a close look at your company’s financial health, and finding dust bunnies under the ledger could derail the deal.
Lauren Simonds is the managing editor of Small Business Computing. Follow Lauren on Twitter.
Adapted from How To Choose A Broker To Sell Your Small Business, by Pedro Hernandez at Small Business Computing. Follow Small Business Computing on Twitter.