Considering selling your business may be the largest transaction you will do in your lifetime. Choosing the right business broker to represent and market your business is a decision that shouldn’t be taken lightly. It’s logical to think that a broker familiar in your industry is a good thing, right? So is it important to list with a broker familiar with your industry?Maybe not.
What the data says about if you should list with a broker familiar with your industry
The data suggests that it is overall business experience, motivation, and process that separates great brokers from mere mediocre ones. And their specific industry experience holds little value. This may be something you want to focus on instead of just choosing to list with a broker familiar with your industry.
Bianca Evans, business broker with Transworld advisors suggests working with a broker in the prime of their career. The reason is that this is when their network is the strongest, and they are hustling to get deals done. The business brokerage industry is a popular choice place for semi-retired former executives who are content doing one or two deals per year. “Just be aware ” Evans says.
She shares with us her process to sell a business that applies to any industry. This helps to clarify the answer, is it important to list with a broker familiar with your industry? It’s important to note that deals between buyers and sellers can fall apart at any point in this process. It’s important to not skip any step that may come back to haunt the seller later.
Once initial contact is made between the broker and seller, they need to get familiar with one another. This includes learning about the seller, his or her background, and the various facets of the business. These facets include employees, equipment, operations, and, of course, financials. Evans wants to get a feel for the motivations and health of the business. If all parties are comfortable, a listing agreement is signed.
Evans next has to assign a fair sales price to the business. The primary driver of the value analysis is the financials. In addition, Evans also looks at comparable businesses that have sold locally and nationally. You may think that this is why you should list with a broker familiar with your industry. However, this information is available to brokers in good standing with the Business Brokers of Florida as well as through some national resources. As an added benefit, Evans frequently taps into the information collective of her fellow broker associates with Transworld. Transworld is the biggest business brokerage firm in the world.
At this stage, Evans likes to pause and have a strategic conversation with the seller about the valuation number. This includes if now is the right time to sell the business. “Sometimes the seller is disappointed with the valuation number and would rather spend another couple of years building value before they list the business for sale – and that’s OK. It’s a very personal decision,” says Evans.
Develop an agreement to market the business
Provided the seller still wants to move forward, Evans will create her marketing plan. The marketing plan is designed to communicate to prospective buyers the value proposition. It is a confidential document that buyers need to sign a Non-Disclosure (NDA) agreement to see.
The business is also confidentially listed on BizBuySell. BizBuySell is an online database of businesses currently for sale across the US. “It’s similar to the Multiple Listing Service MLS for residential homes.”
One step missed by some brokers is getting the business pre-approved for SBA financing. “If a buyer wants to use lending help from the Small Business Administration, we want the bank to have already seen the business financials and agree that they would lend the buyer money for the asset.” Doing this step now removes some friction. Also, it allows the business to move faster toward a close once the buyer is identified. Some brokers avoid SBA because it creates a lot more work for the broker, but the fact is, by not suggesting SBA backed lending, a seller may be missing out on qualified buyers who might not otherwise be able to make the purchase.
This is when you know if your broker is hustling. Making calls to other acquiring companies, emailing buyer databases, and talking to other brokers are all activities great brokers do. Evans has invested in a marketing team that does this for every listing.
Signed NDA and buyer qualification
Once a buyer has been identified and expressed interest, the very first step is to have them sign an NDA. This ensures the seller that employees and competitors don’t find out about the impending sale. At this point, Evans and her team pre-qualifies the buyer by getting an up to date personal financial statement. If the buyer doesn’t have enough liquid cash or has poor credit, the transaction will not move forward and not waste anyone’s time.
This is the stage where the broker will share with the buyer information about the business’s financials, facilities, employees, and operations. It’s similar to an executive summary of the business.
Buyer Seller introduction
The broker will arrange a conference call between both parties. This introduction is a good opportunity to get some preliminary questions answered and to establish some level of trust.
It’s common for the buyer to want to physically see the business location.
Once a buyer is confident, they will submit a written offer. Of course, this will all be contingent on a due diligence phase where the buyer takes a deeper dive into the financials as well as obtains bank financing.
Agreement in price and terms
After some negotiation, an agreement is drafted that will sort out details like how long the seller will remain with the business in transition, due diligence, franchise approval (if applicable), bank approval, and assigning of the lease by the landlord.
Finally closing day! While most people picture sitting across the table from the buyer and handing the keys over in exchange for a check, it’s not always like that. Sometimes it is just a wire transfer of funds and you never leave your home.
Great brokers follow a process similar to this and balance egos and personalities the whole way. That’s why it’s no so important to list with a broker familiar with your industry. If sellers use an industry-specific broker, chances are good that they are not local so this process is done remotely. That can be problematic, and increase the chances of the deal falling apart.
Here’s another reason why it’s not important to list with a broker familiar with your industry. Also, unlike industry-specific brokers that maintain a list of buyers in one industry, a general broker like Evans maintains a list of national and international buyers that are looking for good businesses regardless of industry. This means your pool of potential buyers is larger.
Regardless, don’t take the hiring of a business broker lightly. You only have one shot at liquidating your largest asset. So choosing to list with a broker familiar with your industry may be limiting you.
About Bianca Evans
Bianca Evans is an experienced business broker based in Jacksonville, Florida. She is a top producer in her field. She has made over 150 transactions since 2006 which makes her among the most seasoned in the area. She is a Certified Business Intermediary (CBI), a Certified M&A Professional (CM & AP), a Board Certified Intermediary (BCI), and has her B.S. degree from the University of Florida.
Other notable accolades and achievements:
•The Million Dollar Plus Award 2008, through 2020
•Dealmaker Award top 3% in the state for completed deals 2018
-Most dollars sold in North Florida in 2018, 2019
•Sold an array of industries including manufacturing, wholesale/distribution, service, retail, restaurants, professional offices, and more.
•25 years of Sales Experience
She maintains her professional networks by participating in a variety of associations including the International Business Brokers Association (IBBA) and the Business Brokers of Florida (BBF).
One interesting fact about Bianca is that she used to be a business owner herself! She has been on both sides of the transaction when she purchased and later sold that same business. She finds that perspective invaluable when relating to her clients and balancing the many details and emotions.
She is licensed in Georgia and Florida and speaks fluent German.