How Brokers Can Properly Set Seller’s Expectations

The duties of a business broker are vast. From helping the client correctly price their business, to helping them prepare their business for sale, to locating qualified buyers and seeing a deal close, the broker plays a vital role in the outcome of a business sale.

One often overlooked aspect of a business broker’s job is properly setting a seller’s expectations. Just like real estate agents set up homeowners for success by giving them honest insight into listing price and the time it may take to sell their home, a business broker will be more success at their job if they set realistic expectations for their client from the get-go.

A business broker’s job is more in-depth than a real estate agent’s, though, as they deal with way more than just price and timing. A business broker has many different areas where they must properly set their client’s expectations.

Here are four important stages in the lifecycle of a business deal where proper expectations are vital.

  1. Setting a List Price

Business owners are often primarily concerned with the listing price of their business. They want to know how much their business should sell for before they talk about any other aspect of the process.

Oftentimes, price will drive the entire process for the seller. If a realistic selling price is too low, for example, they may choose not to sell the business at this time.

The key word in that last sentence is “realistic.” Most buyers will have a certain price in mind that they’d “like” to sell their business for. But, is that price realistic?

It’s the broker’s job to guide their client through the valuation process, explaining why it’s important and integrating as many independent variations as possible.

Once the calculations spit out a valuation, then you can work with the client directly to create a suggested list price. Having extensive conversations over price from the beginning with your client will help understand what to expect.

  1. Finding a Qualified Buyer

The business broker’s job crosses over to the buyer side at times, especially after the business has been listed for sale. It is now the broker’s job to market the business and, ultimately, find a qualified buyer.

Before this is done, though, a broker should discuss with their client what the client is looking for in a buyer. Are they looking for a buyer of a certain age or with certain experience? Are they looking for a buyer with a specific future plan for the business? Are they looking for a buyer who can pay all cash, or are they willing to take a down payment and ongoing debt payments?

All of these things can be considered qualifying items. It’s important for that you as the broker understand what the seller is looking for in terms of qualifying items, as it can vary greatly from one seller to the next.

It’s also important because what your client desires may not be realistic. They may be looking for an all-cash buyer, but that might not be likely if the list price is $10 million, for example.

By understanding your client’s wishes, you can then properly set their expectations for what types of buyers you are likely to bring them. This will reduce headaches, stress and anxiety that can come from a business sale.

  1. Getting the Deal Finalized

Once you have found a qualified buyer for your client’s business, it’s time to get down to the nitty gritty of the deal — due diligence and negotiation. This is a crucial time in any business deal, and it’s the stage where most deals that fail fall apart.

Buyers often want a lot more information than sellers tend to want to give them. They can even be annoying to sellers if they keep coming back with more and more requests.

Your job as the broker is to manage both sides of this stage in the deal, setting the realistic expectations for both buyer and seller.

You should prepare the seller for what the documents and information the buyer may want to see. Have them gather this information into clean, easily-digestible reports so that they can be sent quickly to the buyer, who can then analyze them with ease.

At the same time, you should set the buyer’s expectations for what the seller will and will not be disclosing. What documents are open for review? What documents aren’t? And, most importantly, what non-disclosure agreements, if any, will the buyer have to sign in order to gain access to them?

If both parties know what to expect when entering the negotiation stage, then it’s likely to go much smoother as the deal progresses to the end.

  1. Preparing the Seller for What’s Next

The best brokers don’t stop working for their clients once the deal is signed, sealed and delivered. Brokers can help themselves stand out by taking the next step and helping the seller prepare for life after business ownership.

Is your client planning to retire? Is your client planning to stay involved in the business in some way? Is your client moving onto another business opportunity? Has your client thought about the tax implications of this sale?

These are all important aspects of a business deal that some sellers may not think too heavily about. But it’s important that all of this is done early in the process, way before the deal is completed. If these questions aren’t answered early, it could cause issues for your client.

The discussion about what’s next for your client is just as important as discussions around price, timeline and buyers. By helping set your client up for success after they sell the business, you’ll be doing your job to the utmost degree.

Our best advice? Don’t waste another day and 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.