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Business Brokering: Maximizing A Business’s Value
Recent estimates reveal that 20% of business owners will need a business broker within one year and that 90% of business buyers will contact a business broker to buy a business.
If you are planning to buy a new business or sell your existing business now or in the future, you can benefit from working with an experienced business broker. Business brokers are experts at helping business owners get the most value from their business; even if that means realizing that the business should not be sold.
Business brokers help business owners with the following:
• Knowing the value of the company.
• Evaluating the needs of the company.
• Growing the value of the company.
• Selling the company for the maximum value.
They will help you to evaluate your company and your priorities and can help to determine the best time to sell a business. They will help you understand the value of your business, and reasons that a business should be sold or should not be sold. If it is determined that your business should be further developed prior to selling it, they will work with you to maximize the value of your business.
Business brokers work intently to get a business sold confidentially and professionally. Owners considering the sale of their business value the professionalism, integrity and confidentiality that are characteristics of professional business brokers. Your business for sale becomes their job.
If you are thinking of owning your own business or if you are looking to acquire a business in order to expand, there has never been a more opportune time to a buy an established business. Corporate downsizing due to restructuring allows experienced corporate managers to venture into new opportunities, markets and territories.
Professional business brokers can provide counsel and services to business buyers who are looking for a business opportunity. They help buyers determine the type of business that best suits their objectives and lifestyle, and then work with them to identify and buy a business that meets their criteria. Sometimes a certain type of business may not be listed with a business broker; they can also work as a buyer's agent to find and acquire a business.
Business buyers and sellers need a business broker for several main reasons; all of these reasons involve a high degree of confidentiality. A professional business broker will protect the confidentiality and integrity of a transaction at all times in order to prevent the following issues:
1. Customers and/or clients could go elsewhere if they knew the business was for sale;
2. Employees could look elsewhere if they knew the business was for sale;
3. Suppliers and creditors might pull credit if they knew the business was for sale;
4. Landlords might make for a difficult situation if they knew the business was for sale;
5. Competitors could take advantage of the market if they knew the business was for sale; and
6. A business’s reputation could be permanently damaged by being listed for sale on the open public market; what if
a deal falls through?
Before a decision is made to sell a business, there are a number of issues to be addressed, such as:
• Listing price of the business
• How to determine the exact value of the business considering its assets, market and financial situation
• What information does the seller need to provide
• What steps to take to properly prepare the business for sale
• Where to list the business for sale without publicly announcing it to employees and competitors
• How to keep sensitive information confidential
• How to find, screen and qualify a buyer
• How to determine the need for a lawyer, accountant, or other outside professional advisor to assist with the sale
Failing to properly manage the sale of your business can cost a business owner. That is why there is such a need for a business advisor who can valuate a business, package a company for sale, screen potential buyers, and negotiate the price that works for the seller.
If your goal is to maximize the sale of your business without disrupting current operations and management, a business broker’s professional expertise can help to prepare and present your business for sale that includes:
• Discussing your objectives and reviewing options
• Completing a company profile that includes the company history, financial and market position
• Recasting the business owner's financial statements to account for discretionary income and depreciated assets
• Discussing the value of a business valuation to determine the true economic and market value of the business based on owner's profile and recasted financial statements
• Preparing a confidential report that summarizes all of the information the buyer needs to make an informed
decision
• Posting a profile of the business on business broker networks -information that can be accessed by buyers from
coast - coast
• Preparing a marketing and sales strategy for targeting and finding qualified buyers
Are you aware of the true market value of your business? If someone wanted to buy your business today, what price would you give them? True market value is obtained by using the services of a fully qualified and experienced business valuation specialist to prepare a market valuation analysis. Without it, the buyer and seller can end up in long, tedious negotiations that can delay the closing of a sale and may leave a significant amount of value on the table.
Businesses often use financial statements prepared for tax purposes as a starting point for determining value. Assets are written off rather than capitalized. Profits are minimized to reduce taxes and tax allowances are taken to reduce asset or market value. A professional market valuation analysis reflects the fair market value of a business by recasting depreciated assets and cash flow in the current market. Placing the right value on your business is essential if you need to:
• sell your business at its fair market value
• provide a lender with fair market value information in order to "pre-qualify" the buyer
• plan for a merger, acquisition or stock offering
Winthrop Real Estate Solutions recommends that all sellers, prospective or active, complete an independent business valuation prior to listing their business for sale. A professional valuation can play a key role in helping you to maximize the value of your business.
Once the sales objectives have been defined, financial statements recast, and the market value of the business has been established, the business is ready to be listed for sale. The first step in this process is to prepare a confidential offering report that includes the history of the business, its financial statements, marketing materials, and the management's view of the future. This will be shared with qualified buyers.
Then the business will be listed on our network of broker affiliates who can access, study, understand, and promote your business to their networks of interested buyers.
Customized marketing and sales strategies are vitally important in order to identify potential and appropriate local, regional and national buyers. Listing a business on a nationwide broker network that can access, study, understand, and promote your business to their networks of interested buyers greatly increases your chances of a successful sale.
Recently the economy has seen an increased number of business executives who are leaving the corporate ranks due to corporate downsizing or company restructuring. Many of these professionals are looking to buy viable, established businesses. The economy is also seeing the consolidation of many market segments. Competitive firms are moving into new markets by merging their operations with established businesses.
The hardest part of selling any business is finding a qualified buyer. It is unlike selling a residence where there can be an unlimited number of prospects. Business brokers are selling a business whose name, location, customers, and finances are kept confidential until a prospective and qualified buyer can be brought forward. A business broker can search the market for buyers who have the capital, commitment and business knowledge to take your business to the next level through such resources as:
1. A private network of buyers who can be quickly screened and pre-qualified
2. Use of the national database of business brokers that contain a listing of buyers nationwide
3. Targeting specific companies or competitors who may have an interest in purchasing your business
4. Contacting equity companies and private equity investors that seek to invest in business ownership with respective management teams 5. Running ads when needed in appropriate trade publications geared toward purchasing a business.
Once a prospective buyer is screen and qualified, a business broker will provide them with the confidential offering report which includes your company history and background information and business valuation reports. A business broker should screen each buyer to ensure their objectives meet your objectives. A professional business broker’s object is to present pre-qualified buyers who have the interest, commitment and finances to close the deal.
It is recommended that a buyer perform a due diligence investigation on the business prior to closing. The prospective buyer should examine the books, check out the facilities and inventory, and review the records to confirm all of the representations made by the seller are true and accurate. A business broker can make sure that the process is kept moving as you don't want delays, and can keep prospecting for buyers to ensure that your deal goes through. They can act as the point person to address any issues the buyer or seller may have during this review, working with both parties to ensure that the deal goes through smoothly and efficiently.
Closing and transferring any business can be a complex process involving tax and liability issues. A professional business broker can manage the process to ensure a smooth transfer for both parties with regards to:
• Tax situations
• Financing arrangements
• Training and transition considerations
• Non-compete provisions
• Lease and real estate transfers
• Release of personal guarantees
The two main reasons why many businesses do not sell are that the business is under-marketed and/or incorrectly priced. If you have worked hard over the years building your company you expect to be compensated in a timely manner with a fair price that reflects your hard work and commitment.
When it is time to buy or sell a business, contact Winthrop Real Estate Solutions to market, price and sell your company successfully. For more information contact Howard Weldon.
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Howard Weldon
Winthrop Real Estate Solutions, LLC
1240 Pawtucket Ave., Rumford, RI 02916
(Cell) 401-525-6544
(Fax) 888-679-0773
WinthropRE301@Gmail.com