Why Use an Intermediary to Sell My Business?
Some sellers, both inside and outside of Colorado, are initially reluctant to use the services of an Intermediary when putting their business on the market. Typically, this reluctance stems from one or both of the following concerns:
- The hope that, by dealing directly with the buyer, the net sale proceeds of the business will increase, as no brokerage commission will be involved;
- The fear that the Intermediary will somehow coerce or force the seller to enter into a transaction against his or her will.
While it is true that a commission is payable when an Intermediary is involved, we believe that the value added to the transaction usually exceeds the fee. The structure of a transaction is often a critical factor in determining what a seller will walk away with when the transaction is over. Maximizing the sale price does not guarantee maximum return. A skilled Intermediary can help negotiate the deal structure that is best for you, which is why you should use an intermediary.
A look at the process of selling a business should allay any fears about pressure to accept a deal that will not be in the best interests of the seller. Throughout the process, sellers are encouraged to seek the help of competent professionals to ensure that their interests are protected. A skilled Intermediary will work with the seller’s attorney and accountant, or will recommend attorneys and accountants who are experienced in working through the various aspects of a transaction. If the intermediary is acting as a “Seller’s Agent,” the intermediary has a fiduciary duty to represent the seller’s best interests.
In addition to the financial gain generally associated with the use of an Intermediary, there are other items an experienced intermediary brings to the table; confidentiality, screening and pre-qualifying potential buyers, a customized marketing plan, and the possibility that their pre-identified and pre-qualified buyer list contains the right buyer for the business. We hope these reasons answer the “why use an intermediary to sell my business?” question and make you realize “I need an intermediary,” because we could all use one.
Assets that an Intermediary Provides
Most sellers have the legitimate desire to keep a pending sale confidential as to employees, customers, and competitors. How, then, does a seller reach the people who have the interest and ability to purchase the business? Do key employees leave the business when faced with the prospect of a sale, leaving the owner to scramble to fill the positions, to do the work him or herself while marketing the business, screening prospective purchasers, and answering questions from “tire-kickers?” Or worse, will the competition take away business if customers get nervous upon hearing of a potential sale? An experienced Intermediary lessens those concerns. Keeping the sale confidential is an important part of the job, through blind ads and non-disclosure agreements with potential buyers.
Screening and Pre-qualifying Prospective Buyers
A skilled business intermediary in Colorado Springs, Denver, or any city will obtain confidentiality agreements from potential buyers, as well as an indication of financial qualifications. Their contacts with various lenders should help smooth the transaction by helping the buyer obtain acquisition financing and assisting the lender with required documentation.
It is particularly important if you want to sell your business to understand that when you work with an intermediary as a Seller’s Agent, he or she is on your side, working with the buyer to negotiate details and working with lenders, attorneys, and accountants to smooth the transaction and obtain the best deal for you, the seller. Like any other advisor, you must be comfortable with the professionalism and integrity of the business intermediary that is working with you.
Do I advertise that I am going to sell my business in the newspaper? Online? With signs at my place of business? Using direct solicitation by mail, phone, or email? Do I need an intermediary? These questions are best answered by professionals who are experienced at getting the phone to ring and then discerning between tire-kickers and qualified buyers. A comprehensive marketing plan will include a detailed presentation package.