Negotiation

Business Brokers, Why hiring the right broker can make or break the Sale

POSTED IN Buy And Sell Business, Negotiation, Selling A Business

If you are thinking about how to sell your business and have considered handling the business sale process on your own in order to ‘save’ on business brokers fees..STOP!

Now obviously I am biased but if you want to sell your business and even if you are looking to buy a business you need to have a business broker on board. For 95% of business sellers/buyers valuing a business for sale is a completely unknown business skill. Also it can be very challenging having to deal with all aspects of a business sale or purchase by yourself and a good business broker will be experienced and able to steer you through the process with ease.

Why do I need a Broker to Sell my Business?

Selling a business requires specialised business sales knowledge. It is not like selling real estate. There are many variables involved and often highly specialised skills are required to sell your business, especially in two key areas:

  1. Valuing a business for sale
  2. Actually getting the deal completed and over the line

A good business broker will have the specific experience that other standard business advisors or you the vendor just don’t have. They will often have access to currently qualified business buyers and will be able to evaluate how serious or suitable they really are. Also why it is important to sell your business with a business Broker is the project management role a Broker can take on allowing you as the vendor to continue to look after the day to day running of your business.

“How Do You Sell A Business?” Negotiation: the key to successfully completing the business sale…

As business advisors, whenever we are asked “How do you sell a business?” we always discuss the hugely important aspect of the business sale process which is the negotiation skills of the business broker.

Negotiation is a crucial factor for achieving a successful business sale and is the number one area we find most vendors handle very poorly because they are too emotionally attached to the outcome of the sale of their own business.

Our experience is that having the right negotiator or business broker can make or break the sale of your business.

Negotiation includes staying in contact with the prospective business buyer, showing tenacity in working out a good outcome for all parties, and being sensitive and approachable at all times.

What can I expect Business Brokers to do for me?

An important part of the business broker’s role is to get to know enough about your business and your industry so a selling memorandum can be created. This will also play a key role in valuing a business for sale. The descriptions and information provided in the selling memorandum are the first impression a potential business buyer gets of your business and should be designed to entice the business buyer to want to find out more.

Furthermore, the Broker can help you manage other professionals involved in the business sale such as the Accountant and Lawyer and bring them all together as a team. As the Broker is involved at the overview level of the sale, he/she will know best when to start the actions and preparation of relevant documentation.

How do I find the Right Business Broker for me?

You can examine the Business Brokers experience, qualifications and industry knowledge but ultimately, deciding factors should be that you can work with the personality the Broker displays and whether he/she shows commitment to be your guide and bring the business sale to a satisfactory outcome for you and your business buyer.

When you approach business brokers gauge the amount of enthusiasm and the type of questions he/she is asking. This will give you a feel for the level of interest and knowledge in your business ideas and therefore the sale.

The most important selection criteria for your business advisors:

In addition to the obvious “are they capable” and “are they go-getters” etc, we suggest that ultimately, the most important determining factors for your business advisors are:

  • do you like them?
  • do you trust them?
  • and are they responsive?

Because remember that you are handing over the sale of your business (your livelihood and often life’s work) to this person AND you will be working closely with them for some time, so you need to trust them completely as a business advisor.

Final Thoughts on Business Brokers…

Good business brokers are invaluable not only in valuing a business for sale and business sale negotiations, but also in helping you with your overall exit strategy and ensuring that you sell your business for more money than if you tried to do it yourself.

Business Brokers: 3 Things you should know when engaging a Business Broker

POSTED IN Buy And Sell Business, Negotiation

When you have decided to buy and sell a business, it is a good idea to engage a business broker to guide you through the buying and selling process as safe and smoothly as possible.

As a seller the business broker can take on a large part of the actual business sale process for you and help you enormously with your exit strategy. In the case of buying a business, brokers inevitably end up as pseudo business advisors and can give you many profitable business ideas to help you buy a business.

1. A business broker can help coordinating your professional team of business advisors

If you buy and sell a business, the broker takes on the intermediary role and helps coordinate the entire team of professionals required to bring the business sale/purchase to a satisfactory outcome. In some cases the broker might advise or at least point out where to find appropriate, reliable business advisors such as accountants or lawyers if you do not already have your own. The broker will know at what stage to involve who and which documents are necessary to be prepared so it is a good idea to have a good broker who can coordinate and motivate the team well.

2. You can ask to be fully involved in the business sale – or not

Depending on your personal situation, you might like to be fully involved in your business sale or purchase of a business or you might like to rely on a professional business advisor such as the business broker to look after all aspects for you. As a business seller, meeting all the potential buyers can be a good experience or you may prefer to leave the screening of the buyers to the broker so you can get on with your business.

If you are looking to buy a business you may have your own “buying a business checklist” or you may prefer to rely on the broker to get all the relevant information for you. Either way, a business broker is a qualified and ideal intermediary to help in the purchase or sale of a business.

3. Profitable business ideas – It’s not always about the money

Business sales and the final deal are made in many ways and price should not be your sole requirement towards a successful outcome for the purchase or sale of a business. If you look at price only you may actually lose out on potentially better buyers or a better deal on either side of the buy and sell a business game. A business broker should have many profitable business ideas to help make the deal work. Some of the best business ideas to consider in a business sale would be options such as vendor finance, earn-out plans, no money down strategies, extended settlement, extended hand-over assistance or other ways to negotiate a successful outcome for all parties. Tact and excellent negotiation skills are required in such deals and a broker will be more able and objective in creating such deals for you.

The Final On Business Brokers…

Beware of business advisors who make comments or statements about your industry of which they clearly know nothing, and most of all, ask for clarification whenever you do not understand the jargon or meaning of something in the sale process.

While you most likely are quite capable of playing the buy and sell a business game alone, the many steps on the way are not to be taken in a casual manner and by engaging professional business advisors – and specifically I mean business brokers, you will avoid many costly and time consuming mistakes and ultimately achieve a far better result when you buy a business or implement your exit strategy.

Business Broker Confesses -My Pet Peeve

POSTED IN Negotiation, Recommended Reading, Selling A Business

As a business broker am I doing something wrong with my vendors?

The best business advice ever we can give you when it comes time to sell your business to an interested buyer…

Only answer what is asked of you. Truly, its that simple!

For some reason some of my vendors over the years just dont seem to get this. We know (and understand) that this can be challenging for most vendors especially when they have in front of them the perfect buyer and they are keen to sell their business to them. Through selling our own businesses we know that feeling when your business is on the line and you've got an interested business buyer, you can't help but over talk a little bit too much about your business. The danger here is twofold:-

  1. You will inevitably say too much and bring up objections or concerns that the business buyer may never had considered before (we see this happen all the time), and
  2. You will actually oversell it and turn your business buyer off

With our business mentoring this is how we actually coach our clients word for word on this critical point:

Only answer what is asked of you. Just sit back. Relax. Listen really carefully to what the business buyer asks and shut up. Only answer what they ask -other than that, shut up!

Hopefully this simple advice is easy to understand! I have noticed that some of my vendors still don't seem to get it, but my hope for you is that you DO get it! Believe me -I have seen this one make or break the sale of multi-million dollar businesses many times. (it is painful for me even thinking about it!) I will say it again, simple, but break it at your peril – as business brokers we have seen plenty of business sales tip over because of this.

One important clarification needs to be made here: we are not trying to with-hold business information. This is not what it's about. You always tell the truth. You have to answer honestly your business buyers questions because they will eventually find out the truth anyway, so dont withhold anything, especially if the buyer is experienced and a smart business buyer or operator. BUT, and the big BUT, if they don't ask it, don't volunteer! It's not important at this point. Because inevitably, you will say something wrong and potentially put doubt or put them off the business in some way or you'll give away too much negotiating information.

What I think is going on: As a vendor you will more than likely be highly emotional about the sale of your business, and emotionally attached to the outcome of the sale of your business. This can be challenging at first when it comes to knowing what to say and most importantly what NOT to say. As I said earlier Liz and I have been there ourselves. I remember when I was selling our first business, it's a bit scary (lots of emotions) and we definitely over-talked and said too much. But the way to combat this if you're in that position is: ONLY ANSWER WHAT IS ASKED OF YOU!

And if you can't remember that one, then that leads us into our next inside business tip… (again, nice and simple!)

Matt and Liz's Inside business tip: Keep asking the business buyer questions

If you need to say something, which you will more than likely do on your first meeting because you'll be nervous, (nearly every vendor does this so dont feel too bad!) just start asking the buyer questions. Just simple questions such as:

  • Why they want to buy your business
  • What they're going do with it, what their plans and dreams are for it
  • Do they know how to run it?
  • Do they know anything of it?
  • How long have they been looking at buying businesses?

So to repeat: Most importantly, if you need to say something, make sure it's a question to them. This is the best way I know to avoid saying too much and it has the added important advantage of helping you qualify your business buyer and finding out what the buyer is looking for which will become more important as your business sale progresses.

If you're game, why not share your experiences with us below if you have ever experienced someone (maybe yourself or your even your business broker!) speaking too much when trying to sell your business.

Selling Your Business -A Quick Negotiation Tip

POSTED IN Negotiation, Selling A Business

Here’s a simple and neat little negotiation tip for you when it comes to selling your business that you may not have thought much about before. Worth noting down and paying attention to because we have used it many, many times to help our clients sell their businesses for top dollar.

Always leave something up your sleeve!

This is particularly handy to have in place when selling your business and is something we always look for when working with vendors. If negotiations start to get “tight” or look like they are going to stall, then by having a “bonus” you can add into the deal can often keep the negotiations moving along, or just by throwing in a bonus, this can often be enough to sweeten the deal enough to get the buyer to commit.

In a way its similar to the idea of “Act now and get these 3 exciting bonuses” that you see used so successfully in direct mail offers. Important! Dont word them as “bonuses” -just use the concept!

The best way to explain exactly what we mean here is with an example. An ideal one we like to use is if you know there’s an good upcoming contract or big sale that you are likely to get, then dont reveal it too early in the negotiations with the buyer. Just “keep it up your sleeve” for a later point in the negotiations as an enticer to get the buyer to say yes to your price.

Another one we will commonly use is stock or excess stock. If you have excess or aged stock you can often turn it into your bonus. You can simply “offer” to hand it to the buyer for FREE. But keep this up your sleeve until the last point. Sometimes, you even keep this one up your sleeve until the signing of the contract.

IMPORTANT: Remember to use these bonuses strategically: Make sure you build up the value in the buyers eyes and don’t just hand the bonuses away as a minor concession.

Buying And Selling Businesses -specific negotiation tactics

POSTED IN Negotiation, Selling A Business

There is lots of information out there on how to negotiate in business, but nothing specific to buying and selling businesses, so we thought we would share with you some of our key tips and tricks that we teach our personal clients that you may not have considered before especially when it comes to buying or selling a business.

These are some of the key tips that we have noticed over the years that if people get wrong then 9 times out of 10 the business deal will tip over (not proceed). So if you have any interest whatsoever in buying or selling a business pay close attention!

Note that we write here from the point of view of someone selling a business, but the same tips apply equally if you were a buyer of a business.

Tip #1: Keep the business negotiations as simple as possible at first.
Hand in hand with this is make sure you leave the toughest issues until last. A successful business sale is all about a series of steps (sometimes even milestones!) to each new level. We like to describe this as “foot in the door” to the next point in the sale and negotiations. You dont want to get stalled on one particular issue at the start of the negotiations, and you also dont want to confuse the buyer, because “a confused mind says no”. You want lots of little “yeses” to lead the buyer through each step of the sale process leading up to the big yes at the end. Make sure your initial ideas and solutions are simple and easy to understand, and always cover the minor issues first so you get momentum going in favour of agreement.

Tip #2: Always Develop Multiple Solutions.
Having lots of solutions to resolve problems can keep a stalling business negotiation going. Ideally, get the buyer to be actively involved in coming up with these solutions and brainstorm with advisors and associates until all possible solutions are explored.

Tip #3: Be flexible but ask for concessions
Hopefully this is self explanatory, but we want to point this out to you because this is an area where we often see business owners fall down when it comes to selling their business. They are not prepared to be flexible at all -which more often than not leads to the entire sale tipping over. It is amazing how often they just dont get this! A buyer can all too easily walk away from a sale and 9 times out of 10 they will do exactly this if the seller is not flexible in some way.

Now a very important point here is that we are not saying to go over the top and give everything away. If you do give in on something in the negotiations then make sure you ask for a concession in return! What we are talking about here is the age old negotiation technique of “Give and Take”. For example, a buyer may insist that they are not prepared to pay for stock older than 1 year old, then you can counter with “ thats fine but if you wont pay me for that stock then I can take it and keep trading with it until it is all sold”

There is clearly a lot more inside business broker tips to negotiations of a business sale. In our e-mentoring course we go into a lot more depth on business negotiations and go through in detail the exact details we teach our personal clients who we help sell their businesses. If you dont get the important skill of business negotiation right, especially when buying and/or selling businesses the deal will most likely tip over (not proceed). It is the number one reason that we see deals tip over, so if you are serious about buying or selling a business why not check out our e-mentoring program by clicking here:

http://howtobuyandsellabusiness.com