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Business brokerage is a very specialized area of commercial real estate. Your
broker is involved in
buying and
selling inventory,
equipment, customer base valuation, and at times a
franchise. Most business owners have spent years in
developing their business and it is crucial for the broker
to help them find out what their business is worth, as business
owners know how much they want for their business, but they
don't know its market value.
There are many reasons why selling a business is
complex. Here are some key points to consider:
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Due
diligence. It’s a buyer’s
responsibility to do due diligence to spot potential
problems or inaccuracies before buying a business. Sellers
are not always honest and there are often surprises. A
good business broker knows this and can help you work
through problems. They’ll help make sure the records, tax
returns, and financials are accurate. Most sellers
exaggerate the price. Agents may take the owner's word on
the value of the business. Business brokers and agents who
understand this won’t take a listing if the price is
unrealistic because they know the business won’t sell. A
professional business broker will help establish a fair
market price and deal terms. They’ll also make sure the
business is ready to sell before it hits the market.
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Small
businesses have extreme price fluctuations. Residential
home prices are not as volatile as small business prices
are. The value of a business can change quickly. Knowing
what’s necessary for each step in the buying process is
imperative.
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A
business listing must be kept confidential. You can’t show
a business like a house for sale and just start showing
it. There is a delicate balance between advertising the
business to potential buyers and keeping it under wraps to
customers, vendors, and employees. From the listing until
the business deal closes, confidentiality is important.
Many deals are compromised or fall through because of
breaches in confidentiality.
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Employees get nervous and may leave for
more stable employment. Your employees represent an
important aspect of your company's value.
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Competitors may take advantage of your
intention to sell by using the information as a way to
gain an advantage and steer your customers toward them.
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Suppliers have extended credit to your
business over the years. If they find out you are
intending to sell, they may request COD payments.
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Your customers may become nervous and
decide to trade elsewhere.
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You need
errors and omissions insurance. Selling a business is more
complicated than selling a home. Lawsuits can and do
result even when you’re prepared. Business brokers carry
this insurance to protect themselves and they are covered
if costly problems occur down the line that they were not
responsible for during the sale.
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