In recent times, the term "broker" has often carried negative connotations, largely due to high-profile scandals and financial crises. However, it's essential to recognize that many professionals in the industry uphold ethical standards and provide valuable services. In an effort to distance ourselves from this tarnished image, many in our field have adopted alternative titles such as Advisor, Intermediary, or Banker. At our firm, Transworld Business Advisors in Cleveland, and personally as Managing Intermediary, we've made this transition as well.
Let's start by clarifying what a broker does. According to the dictionary, “a broker acts as an intermediary between buyers and sellers in various transactions, facilitating deals and negotiations.” However, this definition barely scratches the surface of the comprehensive role that business brokers fulfill.
To simplify, let's break down the business sales process into four phases, each requiring a multitude of tasks to ensure confidentiality and provide optimal representation for business owners:
Phase 1 – Preparing the Business for Sale: This involves evaluating the assets, operations, and financial performance of the business to determine its fair market value. Exit planning services are also crucial during this phase to address tax implications, resolve any legal or financial issues, and prepare the owner(s) for the sale.
Phase 2 – Marketing the Business for Sale: Here, the broker prepares confidential marketing materials and an offering memorandum to promote the business to potential buyers. Marketing strategies vary depending on the business's size and demand. The broker screens inquiries, qualifies interested parties, and manages the signing of Confidential Non-disclosure Agreements, which can range into the hundreds.
Phase 3 – Negotiations, Due Diligence, Legal Liaison: The broker coordinates offers, presents them to the owners for evaluation and negotiation, and communicates with buyers to finalize terms. This phase involves managing due diligence, assisting with financing, coordinating legal documentation, and ensuring a smooth transition to closing.
Phase 4 – Closing and Transition: Here, the broker facilitates the signing of legal documents, assists with employee transfers and payroll setup, manages service transfers to the new owner, and coordinates training sessions between the seller and buyer.
Selling a business is a complex, full-time endeavor. Hiring a reputable business broker, intermediary, banker, or advisor—whatever title you prefer—is crucial. This allows the business owner to focus on day-to-day operations while the broker handles the intricacies of the sale process. It's not uncommon for brokers to invest hundreds to thousands of hours in completing a transaction. Beyond convenience, hiring a professional ensures confidentiality, maintains professionalism in negotiations, identifies and qualifies buyers, and manages the due diligence, legal, and transition processes.
In conclusion, I hope this brief overview sheds light on the vital role of business intermediaries and dispels misconceptions about the industry. Utilizing a reputable intermediary to sell your business can lead to a more successful sale at a higher price. For a free business exit analysis, please contact Transworld Business Advisors of Cleveland West, independently owned and managed by Michael Snider. You can reach Mike at [email protected] or 440-628-4000.
