Removing Roadblocks and Controlling the Deal
A business broker’s job is often compared to that of a real estate agent. They are responsible for finding a match between a seller of a business and a buyer, and then making sure the deal goes through.
In between preparing a business for sale and closing the deal, there are many other people who will play a role how the deal progresses. Much like a buyer attempting to secure a mortgage company or conduct a favorable home inspection, these other entities involved present challenges and potential roadblocks to a business deal.
Instead of that mortgage company, though, the most common outside parties involved in a business deal are lenders, attorneys and accountants.
Often, the key to whether a business deal closes is how well the broker is able to control the deal and keep the process moving along.
Why Brokers Must Control the Deal
Sellers hire business brokers because of the value and expertise they provide in the industry. If sellers were able to handle those roles themselves, they would gladly do it — but most simply can’t.
A large part of a broker’s job is to educate both sellers and buyers. These people are good at what they do, but they often have unrealistic expectations about how a business deal will progress. And this isn’t outlandish. After all, this is a first-time experience for many buyers and sellers.
A broker’s ultimate job is to see a business deal get from listing to closing successfully. To do that, they must act as a mediator or agent between multiple people at multiple stages.
A simple way to understand a broker’s role is to consider business brokerage as a game, where a ball gets passed back and forth. The two sides are constantly passing the ball back and forth to win a game. In this particular game, it’s ideal if everyone is a winner in the process of buying and selling a business.
The broker’s job is to force the ball back and forth. The broker shouldn’t want the ball in their court. They should pass it along and make sure the game progresses and no one is holding the ball for too long. As most brokers know, time is the killer of all deals.
Setting Up the Seller for Success
A broker’s job begins with the seller, as they are the broker’s client. A broker needs to prepare the seller for an offer at the listing stage. It’s important to educate the seller about the typical process and set realistic expectations when it comes to time, steps and sales price.
One way to do this is to get the seller to think empathetically by having them think as if they were in the buyer’s shoes. When it comes to listing the business, aim to have the seller agree to a price that not only works for them but would be reasonable for a buyer to pay in the current market.
Have the seller ask themselves whether they’d pay X for a business and wait Y years to get back what they invested today. Getting sellers to step outside their own shoes can help set realistic expectations in regard to price.
Another key in dealing with sellers is to educate them about the role their CPA and/or attorney should play in the business deal. They should be used as trusted resources but shouldn’t be relied upon for advice on selling the business. That’s what they should rely on the broker’s expertise for.
Treating the Buyer with Respect
While the buyer is not technically the broker’s client, they are obviously essential to the success of any deal. As such, all potential buyers should be treated with respect and handled as if they are valued players in the deal.
It’s important that potential buyers know brokers are responsive. Responding to inquiries within one business day is a great way to make them feel valued.
The broker’s job as it relates to buyers is to collect background information and financial wherewithal so buyers know who they’re going to be dealing with. When possible, meet face-to-face to iron out differences and answer questions directly. During the coronavirus pandemic, of course, that may mean holding virtual meetings over Zoom.
This is important because, as a Forbes article emphasizes, 93% of communication effectiveness is determined by non-verbal cues. And these are impossible to obtain via phone, text and email.
Dealing with the Potential Roadblocks
While it would be nice to just have to deal with the two main players in the game, there are many others who will play a part. Unfortunately, these ancillary players are the ones who often present the biggest challenges and roadblocks to a deal completing.
These players include:
- Lenders: If a buyer requires a loan to finance the deal, a broker can help the buyer navigate this process that could include proving financials, setting up licenses and obtaining waivers.
- CPAs/Accountants: These players can be involved on both sides of the deal. They often play a huge role in the business valuation, with seller representatives thinking the business is never priced high enough and buyer representatives always thinking it’s priced too high.
- Attorneys: They can sometimes slow a deal down as they look to rack up billable hours. One of the biggest challenges a broker might face is an attorney who is looking to renegotiate a deal.
- Landlords: Landlords could have extensive application requirements for the buyer, and might try to increase rent.
Brokers Need to Keep the Deal Moving
While most of the broker’s job will be focused on the buyer and seller, they also need to realize there are other players who might play a role in the game. Understanding their role, empathizing with them and keeping the deal moving along is the primary job of a broker.
By setting realistic expectations early on in the deal — before these ancillary players even enter the picture — is a great way for a broker to ensure more deals close.
Talk to a Sunbelt South Florida broker today!
Sunbelt Business Brokers of West Palm Beach provides dedicated business brokerage services for all of your selling needs. Whether you are an established business owner nearing retirement and looking to sell, or an ambitious entrepreneur seeking your next investment opportunity, there is no reason to look beyond Sunbelt Business Brokers. Visit us at 800 Village Square Crossing, Suite 216 Palm Beach Gardens, FL 33410 or contact us at (561) 832-9222.