If You Already Have a Buyer, Do You Need a Business Broker?

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Originally Posted On: If You Already Have a Buyer, Do You Need a Business Broker? (franchiseclearly.com)

When you started your business, you probably didn’t spend much time thinking about how you were going to leave it. The reality is, you will exit your business one day. Shaping the terms of the departure is something that requires careful planning.

By far the most desirable (and lucrative) outcome is to liquidate your years of hard work in the form of a business sale. One of the advantages of belonging to a franchise network is that there are usually many willing buyers that already understand and value your business. Finding a buyer might be as easy as letting your fellow franchise owners know you’re for sale. It can make for a clean and fast transaction.

And while that’s good news, you should still hire a business intermediary. This is a company or individual that looks out for your best interests throughout the process. If you already have a buyer identified, you could pay less than the customary fee. Franchise Clearly is a firm that can help. Principal, Jon Franz publicly says that they gladly reduce by a few percentage points. But is it worth it?

Sellers tend to focus on the sales price number. While important, it’s not necessarily what makes one deal better than another. Other deal points should be discussed and negotiated upfront. Who gets to keep the lease deposits? Who pays the franchisor transfer fees? Which party will be responsible for the lease assignment fee? These details all cost money and can add up to thousands of dollars. If the seller waits until the time of closing to negotiate these, they lose leverage and it won’t end in their favor.

What buyers don’t want you to know

Buyers, especially experienced ones, don’t want you to have seller representation. The reason is they know they can get a better price and terms that favors them. Without having a broker working for you, there is little sense of urgency for the buyer. Worse, buyers may string you along for weeks and months only to change their mind. You’re left wondering, were they ever serious to begin with? An experienced advisor can weed out these tire kickers and dreamers before they waste your time and get your hopes up. The business broker’s job is to answer questions and serve as a buffer so you can concentrate on running your business and keeping it performing well. Failure to engage with a broker means you run the risk of fumbling the most important transaction you may ever do.

Franz explains that there are hundreds of details to consider when selling a business. If they’re mishandled or attempted in the wrong order, it could cause the deal to fall apart and potentially end with legal action. His firm follows a defined 5 step process that has been perfected over time.

1) Seller Profile
2) Buyer Profile
3) Execute
4) Due Diligence
5) Closing Checklist

Franz also suggests not getting too far with a buyer until the market has been tested. By expanding the buyer pool, the seller can learn the true value of the business. “I tell sellers all the time: if you have a good business, and one person is interested in buying it, then there are other buyers out there too.” There’s little downside to officially listing the business. At best, multiple buyers will compete and bid up your sales price. At worst, it will keep your existing buyer motivated to bring their best offer terms and get to the closing table quickly. “Time kills deals,” says Franz. “As a seller, you want buyers hungry.”

Experienced franchise business owner, Blane Britton says he wouldn’t even consider doing a deal without a group like Franchise Clearly. “I’ve found that whatever they charge, it’s well worth it. I want to stay focused on keeping revenues up so I don’t end up giving myself a seller’s discount. I hire the pros because this is what they are good at and do every day. I feel confident that getting the best price and terms well pays for their professional fees.” Hiring a business intermediary (even if you have a buyer) is your best shot at getting a higher price and better terms. With it comes less stress and a quicker sale.