HOUSTON BUSINESS REVIEW

UTILIZING A BROKER, BENEFITS TO SELLER
By Ralph Fain

Ralph Fain is a principal in the brokerage firm, R/Fain Group. Mr. Fain also has over 20 years of broad business experience with Fortune 500 companies. R/ Fain Group is a professional business brokerage firm which confidentially represents the interests of various sellers and buyers. Each week Mr. Fain will give tips on Business Brokering, and how to sell your business.

1. Qualifying buyers – brokers know how to qualify buyers and how to reach qualified buyers. Business owners who attempt to sell their business by themselves soon discover that much time and resources are wasted dealing with non qualified buyers. A professional can help you avoid this costly trap.

2. Confidentiality – there is probably nothing more important than maintaining confidentiality regarding the possible sale of a business until the proper time that the sale should be disclosed. One of the worst things which could happen is that a business’ competitors find out that your business is for sale and they begin to notify your customers of that fact. Same thing for your employees. A lack of confidentiality can financially cripple an otherwise healthy business and, obviously, have a very detrimental impact on the selling price. A responsible qualified broker knows how to ensure confidentiality.

3. Packaging/Marketing the Business –brokers know what information is required by prospective buyers and work closely with sellers to gather that information/documentation and present it in the most professional manner to qualified buyers thus enhancing its probability of favorable impression/reception. In addition, there is no time wasted by the seller in the gathering of unnecessary documentation.

4. Valuation of the Business – determining the value of a business can be a tricky undertaking. A business owner may believe his business is worth somewhere between $1.0 – 1.5MM but that’s a fairly large spread or range (for a business priced at this level) - $500k! Experienced brokers can provide professional evaluations which more closely “pinpoint” a more exact price – thus ensuring no dollars are left on the table by the seller.

5. Time Savings – selling a business is a complicated and full time endeavor. Brokers save sellers both time and resources in the process of selling a business and, as they say, time is money! By utilizing the services of a professional broker, the seller is able to devote his time, energy and resources to the managing and growing of his business and the broker can devote his time and resources to the many aspects of selling the business.

6. Advertising – the experienced broker knows how to advertise the business for sale, knows which web sites are productive, what type of media is appropriate for the particular company/industry, which broker networks are the correct channels, which buyers have an ongoing interest in companies in a specific industry, which prospective qualified buyers to notify, which buyer databases to tap, etc. Most business owners have neither the time nor inclination to acquire this expertise and if they did take the time, it would be time spent away from managing their business.

7. Financing – a professional broker has relationships with several financial institutions and commercial lenders (incl SBA lenders). A good broker knows what paperwork/documentation is required and can greatly facilitate this process. In addition, a broker, with the requisite expertise and relationships can get the financing for many sales pre-approved in advance by the lender. This greatly streamlines the selling process (no delay of 2-4 mos for bank approval) and enables a seller to close much more quickly.

8. Structuring the Sale – owners have a wealth of knowledge and understand the most minute details of their business; many brokers are owners also and know their business inside out. Whereas a seller may not know how to structure a sale (i.e., how much should the buyer put down?, how much commercial financing is available?, is owner financing going to be required and, if so, how much?, what is the norm for this type of business?, what are the note payments going to be for the buyer and does the sales price support this level and provide a reasonable rate of return to the buyer?, what is a reasonable ROI for a buyer?, should the real estate be sold with the business or should it be leased back to the purchaser?, what are the advantages/disadvantages?, does its inclusion/exclusion affect the financing of the sale?, etc.), a professional broker will know how to accomplish the structuring in a manner which will facilitate the transaction.

9. What to Look for in a Broker - Future Topic for the next radio show and e-publication How do you select a broker? Where do I find them? What kind of experience should he have? How do I know he knows what he’s doing? How do I know he’s the best match for me and the sale of my business? How do I check his references?

Please read Ralph Fain’s next article as he tells you more about himself and what he will be contributing as a Business advisor.