A broker is an intermediary who helps to buy or sell a business. He charges a commission for his services. Of course, you don't have to use the services of a broker at all. You can do everything yourself if you have enough competence and time.
But we are convinced that everyone should do their own business: a plumber to fix pipes, an artist to write paintings, and a broker to help the buyer and seller make a safe deal.
So, the mistakes in buying and selling companies are fraught with financial losses. It is better to outsource these functions to a professional broker.
How is the broker useful for the seller?
An intermediary will help to sell a company faster and for greater profit. It will protect against fraudulent schemes by the buyer.
That's how a broker does it:
§ It evaluates the company based on market realities. There are three approaches to valuation: comparative, profitable, and expensive. Sellers often establish value based on subjective feelings and desires. A competent intermediary will tell you whether the value of the business is overstated or underestimated.
§ Packaging the business. Not every company is ready for a change of ownership. There may be underlying chaos in business processes, statutory documents, and accounting reports- chaos which will surely scare off a potential buyer! It is necessary to carry out pre-sale preparation: to bring everything that can eliminate legal obstacles which would derail the transaction. If the problem areas are found, the broker will compensate for them by emphasizing the advantages.
§ Finding a buyer. An experienced broker personally knows those who may be interested in your business. And he also knows other intermediaries who have clients looking for options for profitable investment. It is no coincidence that the most exciting offers are not for open sale and distributed among their contacts.
§ Controlling the negotiation process. The seller is distancing himself from the nervousness and effects of psychological pressure to reduce the price. Some buyers know how to press professionally.
§ Providing legal support for the transaction. It is not enough to find a buyer and shake his or her hand. You need to draw up the sale contract correctly, deposit the money, and register the change of ownership in the FTS. Negligence at the stage of legal registration threatens litigation, the loss of money, and nerves.
How is the broker useful for a buyer?
The buyer has more risks than the seller. You can wind up paying for air instead of an existing company- basically just obtaining a legal entity without an office, staff, and debts. The intermediary will not let you fall into the hands of fraudsters and will help to reduce the price during negotiations.
What he does:
Identifies a search area. Some customers don't know what they want. It's normal; there are many offers available that catch yearning eyes. Do you want to run a coffee shop or a cafe? And here's a dentistry for sale at a bargain! One is thrown from extremity to extremity. An experienced broker will help you understand the diversity of choices and will tell you about the pros and cons of each industry. The work of the broker is connected in this case with a psychologist's job: to understand what exactly the buyer wants.
§ Makes a selection of proposals that fit the criteria of the buyer. Works with bulletin boards, websites of brokerage firms, familiar agents and their own base of contacts.
§ Personally researches all options and participates in negotiations. A professional broker knows what to ask, where to look, what to investigate.
§ Evaluates the business to understand the fair value. If an asset is undervalued, it's urgent to take it. If it is overvalued, then consultation with an independent appraiser will be an excuse for further trading.
§ Checks the legal cleanliness and financial performance of the business. The seller states that his restaurant brings a monthly net profit of $25,000. The broker will request accounting reports to confirm or deny this claim. It is possible that the expense part does not include "grey" payments, which eat up all the profit. Or the accounts are fictitious. When it comes to millions, some people aren't bending on anything.
§ Legalizing the deal. The tricky question is what to do with the down payment. If you give it to the seller directly and the deal falls through, you have to return the money through the court. That's why brokers offer depository services. The deposit is stored in a safe deposit box, access to which is possible for either party only if the terms of the contract are observed.
Transworld guarantees that our highly professional brokers will be able to offer you sound advice and insight into selling your business in your first meeting.