Why Hiring a Business Broker can Maximise your Sale Price

Selling a business can have many different outcomes, but working with a business broker can significantly boost your chances of success. A skilled broker can be a game-changer, helping you maximise the sale. Let’s explore how a business broker operates and why partnering with one could be the smartest move when it’s time to sell your business.

What is a Business Brokerage?  

Business brokerages are the intermediary between buyers and sellers of small, privately owned businesses. They can assist and manage the entire sales process, from initial business valuation to final settlement, helping both parties to get the best outcome out of the sale transaction. 

Advantages of Hiring a Business Broker in Australia

Engaging a business broker can offer several benefits due to their expertise and market connections. Some key advantages include: 

• Specialised Knowledge: business brokers understand all the ins and outs of the market, valuation techniques, and legal requirements, making them valuable guides throughout the sale process.
• Network Access: brokers often have connections with accountants, lawyers, and financial advisors who can provide support throughout the transaction as well as buyers for your business.
• Accurate Valuation: they can provide precise assessments of your business’s worth, ensuring it’s competitively and realistically priced.
• Skilled Negotiation:  brokers are professional negotiators who work to secure the best possible terms for your sale.
• Time and Stress Reduction: they can handle the sale process, allowing you to avoid the hassles and challenges associated with the transaction. 

Why does Accurate Business Valuation Matter? 

Overestimating your business’s value can result in your business lingering on the market, while underestimating it could mean missing out on potential profit. Here’s why getting it right is so important: 

• Informed Decision-Making: a precise valuation helps you make informed decisions and gives you a clear picture of your business’s strengths, opportunities, and areas for improvement.
• Setting Realistic Expectations: owners sometimes overestimate their business’s value due to emotional ties or lack of market knowledge. A broker’s valuation can set realistic expectations, ensuring a better negotiation process with potential buyers.
• Facilitating Transactions: accurate valuations provide a credible starting point for negotiations, making it easier to justify your asking price and speed up the transaction.
• Planning for Growth: brokers also use valuation insights to advise on boosting business value before listing it. This could mean improving operational efficiencies or making strategic adjustments to enhance profitability.

Handling Negotiations: Business Brokers vs. DIY

When Should I Hire a Business Broker? 

Engaging a business broker can be beneficial; however, if you are not sure in which scenarios they can be helpful, here are some examples of where their expertise can help: 

Limited Time or Resources:
If you’re busy running your business and can’t dedicate time to the sale process, a broker manages all the details, allowing you to focus on your daily operations.

First-time Sellers:
If it’s your first time selling, brokers guide you through the process, helping you avoid common mistakes and ensuring compliance with legal requirements.

Complex Transactions:
For businesses with complex financial structures or unique operational challenges, brokers bring expertise by navigating intricate deals effectively. 

Reduced Network:
If you don’t know where to advertise the sale, brokers have extensive industry connections that provide access to potential buyers beyond traditional advertising.

A Desire for a Smooth Process:
If you want to minimise stress and streamline the transaction process, brokers can handle all the details and ensure that everything runs smoothly.

How the Business Sale Process Unfolds with a Broker

Here’s what the process of working with a business broker usually looks like:

1. Initial Consultation and Valuation: the broker conducts a comprehensive assessment of your business, providing a fair valuation and discussing your goals.
2. Marketing and Qualifying Buyers: the broker markets your business strategically and screens potential buyers to ensure they’re serious and financially capable.
3. Negotiation of Offers: when buyers express interest, the broker negotiates the best possible terms, aligning the deal with your expectations.
4. Due Diligence and Contract Preparation: the buyer conducts due diligence, and the broker assists in preparing the purchase agreement.
5. Settlement and Handover: once everything is finalised, ownership is transferred. The broker ensures a smooth transition, introducing the buyer to key stakeholders if necessary.

How Can I Choose a Good Business Broker? 

If you’re thinking about getting assistance from a professional business broker, there are some qualities we recommend looking for, such as: 

• ensure they have the experience and proven track record in your industry; 
• find brokers with industry connections who can maximise opportunities; 
• have a clear commission structure and picture of what services are offered;
• provide a structured process and transparent confidentiality policies; and
• check client reviews and testimonials to verify their success.

Financial Costs of Business Brokers: Are They Worth It?

Usually, business brokers charge a percentage of the sale price as a commission; however, although this may sound like a significant number, we need to put what they also offer on the balance. 

Brokers bring expertise, which often leads to a higher sale price. They access a wide network of buyers, increasing visibility, and their negotiation skills can secure better terms, making the process smoother and less stressful for sellers, especially those unfamiliar with business sales. 

Hence, in the long term, investing in a broker can be worth it as it can lead to higher sale prices that outweigh the cost.

Legal Aspects of Selling with and without a Broker

Finally, the legal side of selling a business is important. Brokers and commercial lawyers facilitate the drafting of contracts and agreements, ensuring clarity and protection. In contrast, independent sellers who draft their own contracts risk oversights due to a lack of legal expertise. 

Brokers also provide clarity on post-closing obligations, ensuring both parties understand their responsibilities. On the other hand, independent sellers must tackle these tasks alone, increasing the chances of missing key details, facing compliance issues, or exposing themselves to liability if obligations aren’t clearly defined.

The Value of a Business Broker in Maximising your Sale

Hiring a business broker can be a strategic move in maximising your business sale price. If you’re considering selling a small business or need advice on legal matters relating to business transactions, H+A Legal is here to guide you every step of the way. 

From business brokerage to buying, selling, or resolving disputes, we provide comprehensive support for your commercial legal needs. Contact us today for expert advice and to explore our range of commercial services.