Myth #1: You have no need for a business broker because you already have a buyer.
One of the most dangerous decisions a business owner can make is hinging the success of their industry exit on the hopes of “one” or even a few prospective buyers. It is very difficult to judge the seriousness of a buyer if he is not competing with other buyers to purchase a business. As a result many business owners waste valuable time and money on a buyer not properly motivated to complete a transaction.
Through bringing multiple buyers to the table, business brokers have the ability to require buyers to cooperate and pursue the business purchase with a sense of urgency. If buyers do not want to engage in the negotiation/compete with other buyers, then they are not a true prospect to buy the seller’s business.
Not only does hinging exit hopes on one buyer require the seller to risk wasting significant time with tire kickers, it also puts a seller in an extremely weak negotiating position. When a buyer suspects he is in control of a negotiation (knows there is no broker working for the seller), he can do whatever he wants to advance his negotiating position: bully the seller, wait until the seller is frustrated enough to accept an unfair deal, etc.
Myth #2: You have no need for a business broker because you are already close to agreeing to terms with a buyer.
You may be close to sealing a deal with a buyer (and avoiding a broker fee) but what affect will excluding an industry specialized business broker from your sale have on your overall net proceeds?
Have you ever wondered why buyers are so anxious to seal a deal before a business broker can get involved? In many cases, it is because buyers are much more experienced and sophisticated than sellers when it comes to transferring business ownership. The last thing buyers want is a business broker educating the seller on what the buyer’s offer should look like. As a result of a business broker’s absence in the sale process, sellers are often overwhelmed at the negotiating table and end up accepting a deal below fair market value.
A business broker can add value to your exit strategy at any given point in your business sale—especially when you are close to reaching terms with a buyer.
Example: Recently a transportation business owner contacted CTA about an offer he had received from a buyer to purchase his business. He was considering hiring CTA to assist him in the sale process but preferred to get the deal completed on his own and avoid a broker fee if at all possible. Without even knowing the terms of the deal, CTA recommended the seller to tell the buyer that he was considering bringing in Charles Tenney & Associates to represent him in the transaction. The seller, a little confused, went away and did as CTA suggested. He came back the next day and said, “I haven’t even hired you and you have already got me an extra 10% on my offer.”
It turns out the original offer on the table was close to 50% below fair market value. Needless to say, now that the seller has hired CTA, the tone of negotiations has changed quite a bit.
Myth #3: You have no need for a business broker because you have bought and sold several businesses on your own.
It is a privilege to work with business owners educated in the process of selling a business—experience helps everyone involved in a business sale. But it doesn’t matter how experienced a seller is, business brokers still afford business owners powerful advantages and unique negotiating tools that give even the most experienced business sellers the best possible chance to netthe maximum amount of proceeds from a business sale.
First, business brokers can provide access to buyers that can change the entire landscape of the net proceeds from a business sale. Business brokers buy and sell businesses everyday. They have access to networks of buyers that sellers would otherwise never be aware of or have access to. And many of these buyers are willing to pay premium prices for the right type of transportation businesses.
Example: Charles Tenney & Associates is working with a group of buyers that is prepared in certain scenarios to offer up to 1 – 2 multiples higher than fair market value for companies. Experienced business sellers, who are ordinarily reluctant to use a broker, could pay CTA’s broker fee 2 or 3 times over and still be ahead in these situations.
Also, business brokers can employ negotiating tactics from a third party position that create unique leverage for the seller. Also a broker can open closed doors at the negotiating table and persuade the buyer to receptive to deal structuring options they ordinarily would not consider if the ideas were presented directly from the seller.
If you have any questions about working with a business broker, please submit the contact form below. An industry specialized business broker from Charles Tenney & Associates will be happy to contact you.
