Selling or buying a business can be extremely exciting and stressful. If you are in the market either as a seller or a buyer, it helps to understand the role of business brokers in the process and how they can help you make the most lucrative choices. Business brokers are professionals who act as intermediaries between buyers and sellers of businesses. These agents can assist you whether you are purchasing or selling a business. Many business owners believe that finding a buyer is difficult, but it is often easier than you would believe, especially with the help of a competent broker.
Finding a Good Broker
In order to find and hire a professional, competent business broker you should ask some of your financial professionals for their recommendations. A good place to start would be to inquire about business brokers that your lawyer, investment banker, CPA or accountant has worked with in the past. Other professionals in the business community may also have some great recommendations for you. Always remember to ask the directly for several references from his or her previous clients.
What is Your Company Worth?
The first step your business broker will take is to determine the value of your business, so that you can establish a fair and profitable selling price. Of course, there are many different elements involved in determining the value of your company. One of the primary ways of accessing a company's value is to have an accountant review your financial statements and tax returns as well as prepare a cash flow analysis. If you are a buyer, your business broker will draft a letter of intent and a formal offer for the business you are interested in purchasing. They will also act as an intermediary between you and the seller during negotiations.
Pre-Qualify a Buyer
After establishing an appropriate marketing campaign, a business broker will pre-qualify any potential buyers before introducing the buyer to you and entering into negotiations. If you are buying a business make sure that you meet certain prerequisites. One of the primary prerequisites is the liquidity of funds to put in escrow as a down payment on the business you are interested in purchasing. Usually this amount is roughly equivalent to fifty percent of the purchase price. They will also assist you with the documentation necessary for a bank or other lender, if you are borrowing the other fifty percent. A note, sellers usually receive on average ten percent more money for their business if they allow the buyer to finance some of the purchase price.
The Role of Your Business Broker during Contract Negotiations
Your agent will also assist you during the contract negotiations. After thorough discussions and negotiations between the seller and the buyer and after all of the concerns of both parties are addressed, a contract is established between the buyer and the seller. When the contract meets all of the contingencies of both parties, the buyer and seller sign the document and set a closing date. Your broker will act as an intermediary on your behalf during the contract negotiations, providing you with an objective perspective and professional advice. The services of a good business broker are truly invaluable during the sale or purchase of any business.
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