A presentation by IBBA about how business brokers can help entrepreneurs buy and sell businesses.

1. How Business Brokers Can
Help Entrepreneurs Buy and
Sell Businesses

2. SMALL TO MIDSIZE
BUSINESSES
• 8 million small to midsize businesses in
the U.S.
• Approximately 800,000 new businesses
are started up each year
• 50% fail the first year & 85% fail within 5
years
• 2% net annual growth
• Only 120,000 to 150,000 businesses are
sold each year

3. Who Are the Buyers
• Family member of the business owner
• An employee of the business
• Individuals that include corporate
executives, blue collar workers, and
foreigners who have moved to the U.S.
• Private equity groups
• Competitors
• Public companies

4. Where Do Sellers &
Buyers Find Each Other?
• Personal contacts – Limited number of prospects
• FSBO Ads – Total lack of confidentiality
• Business Brokers

5. Definition of a
Business Broker
• A Business Broker is an intermediary dedicated
to serving clients and customers who desire to
sell or acquire businesses.
• Typically, a Business Broker:
– Finds Sellers and Buyers
– Provides information and business advice
– Maintains communications between the parties
– Coordinates the negotiations
– Facilitates the closing processes

6. Advisory Services for
Selling a Business
• Determining if a business is marketable and
ready to sell, and if so, help business owners
develop an overall strategy for selling.
• Advise how deal structuring can minimize
legal and tax consequences.

7. Advisory Services for
Selling a Business
• Proper presentation greatly enhances the
marketability of a business. The
presentation typically includes:
– a summary of the company’s history &
background
– normalized financials
– explanation of current operations, and future
opportunities
– maps, pictures, and list of assets

8. Advisory Services for
Selling a Business
• Implement a marketing program designed
to maximize the number of buyer prospects
through utilization of:
– the broker’s database of buyer prospects
– referral network of other professionals such as
attorneys, accountants, bankers, & suppliers
– international & national “Business for Sale”
websites
– and the broker’s website

9. Advisory Services for
Selling a Business
• Buyers often have accountants,
attorneys, and other people advising
them on how to buy a business. The
Business Broker will have the
experience and expertise to insure that
you have strong representation on your
side throughout the process.

10. Advisory Services for
Buying a Business
• Helping entrepreneurs find business
investments is a major part of a Business
Broker’s services.
– Some people come to a business broker not
knowing what they want. They just know they
no longer want to work for someone else.
– Some people want a specific type business.
– Buyers can be individuals, investment groups,
private equity groups, or existing companies
who desire to grow through acquisition.

11. Advisory Services for
Buying a Business
• Find businesses that meet the buyer’s
criteria and investment requirements,
such as:
– Available equity funds
– Type of business
– Size of business
– Location limitations
– Required profitability

12. Initial Meeting With The Seller
• Ask questions regarding business
operations, it is not due diligence time
• Ask about business history and background
• Ask about growth opportunities
• Obtain clarifications regarding financial
data
• Tour the business facilities
• Make your own personal assessment about
the business

13. Where to find Business
Owners Who Want to Sell
• Trade associations
• Referrals from accounts & attorneys
• National websites
• Direct mail and personal contacts
• Business Brokers

14. Why Would Someone Sell A
Profitable Business?
• Tired of government hassles regarding regulations
and taxation
• Tired of employee training and turnover
• Has found another attractive investment
• Health problems
• Divorce
• Partnership problems
• Retirement
• Burn Out

15. Need For Confidentiality
• The owner or Business Broker will require
that you sign a Confidentiality Agreement
prior to your obtaining any significant
information about the business
• Perception relating to buying real estate vs.
buying a business
• Concern regarding premature disclosure to
employees, customers, suppliers, banker,
landlord, and others

16. Meeting the Seller
for the First Time
• Have a personality, sell yourself
• Dress appropriately
• Be friendly, polite and professional
• Explain your background & history but don’t
boast
• Make the Seller believe you’re interested in
his/her business and not interest in
competing

17. Qualifying The Seller
• When you meet the Seller, does he/she seem
honest and straight forward?
• Why is the business for sale?
• Is the asking price realistic?
• Are financials provided?
What to do if not
• Are debts, liens, leases, etc. disclosed?

18. Financing Options
• Does the business meet SBA financing
guidelines?
• Is owner financing available?
Shows confidence in the business
– Are the terms realistic?
– The Seller will require a 1st lien on the assets
and a personal guarantee on the note

19. Typical Confidentiality
Agreement Terms
• Agree not to tell others that the business is
for sale, except for professional advisors
• Agree not to utilize confidential information
to go into competition with the owner
• Agree not to talk to employees, customers,
suppliers, & landlords until authorized by
the seller
• If a Business Broker is involved, all requests
for confidential information must be made
through the business broker

20. Managing The Buying
Process With The Seller
• Don’t insult the seller with a low offer.
• The earnest money contract should be bilateral
not unilateral.
• Be willing to compromise.
• Negotiate, don’t dictate.
• Split the cost of closing.
• Remember, in most cases, the Seller is your banker,
mentor, trainer and goodwill ambassador.

21. More Tips On
Making An Offer
• Time is the death of all deals.
• Due diligence period is typically 2 weeks to
30 days.
• Seller training – 2 weeks to 30 days as part
of the sale price.
• Seller consulting by phone – 60 days to 6
months after closing at no charge.
• If Seller stays on to work – require a
reasonable salary.

22. How To Use The Seller
After The Sale
• Friendly training and Transition
You want the Seller to go above and beyond the call of
duty.
• Provide additional incentives to the Seller to
help grow your business
 Commissions on sales
 Referral fees
 Member of your Board of Directors
 Transition parties with employees, customers, vendors, etc.

23. Other Services Provided by
Business Brokers
• Through our affiliations with other
professionals, a Business Broker can
recommend highly qualified people to help
you in the sale of your business or the
acquisition of a business. These resources
include:

24. Referral Resources
• Financing Resources:
– SBA loans, private equity funds, equipment
leasing, self-directed retirement plans and seller
financing.
• Accounting professionals:
– can help you during due diligence and help you
understand the tax consequences of buying and
selling a business.
• Legal Resources:
– can help you form the right business entity and
create & review legal documents.

25. Choose a Business Broker for the same
reason you choose an attorney and CPA:
…… EXPERIENCE AND EXPERTISE

26. Where to Find a Qualified Business Broker:
International Business Brokers Association
7100 East Pleasant Valley Road
Suite 160
Independence, Ohio
44113
888-686-4222
www.ibba.org