Q&A
What Is The Value In Hiring A Business Broker?
Hiring a qualified business broker can mean the difference between selling your business or not. The most important job a business owner has during this time is to keep the business running smoothly and not lose focus. A broker will market the business for you and act as a gatekeeper, vetting viable buyers while managing the time-consuming task of fielding calls, emails, and requests for information. They protect the confidentiality of the sale, requiring a signed non-disclosure agreement from every buyer prospect before providing information on the business. They coordinate the negotiation and structure of the sale, facilitate due diligence and keep all the parties involved (partners, CPAs, bankers, attorneys, etc.) on track throughout the process. Trying to juggle the process on your own could cost you the sale. Just one missed deadline or a drop in recent sales could cause the deal to fall apart.
When Is The Best Time To Sell A Business?
The best time to sell is when the business is growing and thriving. A planned transition and exit strategy can help maximize profits from the sale. A plan keeps the business running smoothly and protects its value until it’s the right time to sell.
How Is The Value Of My Business Determined?
We look at net profit for the past three to five years based on earnings before interest, taxes, depreciation and amortization (EBITDA) or the seller’s discretionary earnings (SDE). Both are alternate methods for measuring profitability. EBITDA represents the cash profit without non-cash depreciation expense, amortization, taxes, and debt. SDE adds back into income non-essential business expenses of personal benefit to the seller but unnecessary for business operation. These expenses help reduce income and taxes for the owner, with earnings appearing lower than they actually are. Other factors taken into consideration that affect a valuation are comparable business sales, the value of the company’s assets, inventory, business longevity, employees’ tenure, customers, revenue streams, competition, opportunities for growth, risks, accuracy of books and records, and more.
How Much Does It Cost To Work With A Business Broker?
Most business brokers work on commission. Fees are earned as a percentage of what the business sells for and are paid at closing. Commission of 10-12% is common. For higher-value businesses ($5 million and up), the percentage could be lower. An initial retainer fee could also be charged. This fee structure keeps the broker’s goals in alignment with the seller’s, motivating them to get top dollar for the sale.
Once I Decide To Sell My Business, How Long Does It Take?
It depends on the size and complexity of the business and whether the business list price is in line with market values. In our experience, the average time from listing to closing is eight to nine months. The new owner will also expect the seller to commit to a period of time after closing for a smooth ownership transition.
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