Business Brokerage

- for Sellers -

Value = Income x Risk
Professional business brokerage utilizes key financial and operating attributes of the selling business to initiate the brokerage process. The broker's initial service is to promote the availability of the business for acquisition - then to qualify prospective buyers. An objective of the brokerage process is to maintain confidentiality during the exchange of proprietary information. A successful sale integrates tactful negotiating, addresses tax positions, and leverages creative deal structuring into an arm's length transaction accaptable to the seller.

Brokerage - for Sellers

Primary Objectives
Core Broker Services
Seller’s Wants & Needs
Definition of a Business Broker
Law of Agency
The Brokerage Process
Selling Memorandum
Deal Breakers
Seller Tips & Techniques
Business Valuation
The Broker and the Buyer
Brokerage Standards
Tips for a Better Sale

Primary Objectives

A seller’s ultimate objective is to obtain a successful transaction by structuring the best overall deal in term of cash and terms. Perhaps the most important initial matter the seller faces is the choice of brokerage firm.

Our experience and background uniquely serve the interests of the seller.
M & A Services
CBI, Certified Business Intermediary
Accounting & Tax Matters
CPA, Certified Public Accountant
Business Valuations Opinion
ABV, Accredited in Business Valuation
Real Estate Transfer Issues
Broker, Real Estate Commission

The initial objective of our service is to market and direct prospects to the seller’s business offering. The first document viewed by the prospect is a “blind” Business Profile summarizing the key financial and operating attributes of the business. We subsequently screen the prospect as to its buying motives, financial capacity, and suitability for purchasing the listed entity.

Other matters of concern include: establishing procedures for confidentiality, addressing fair market valuation issues, obtaining nondisclosure agreements, sharing core documents, introduction of the parties, communicating negotiation positions, complying with due diligence requests, understanding and properly responding to offers and -- most importantly -- creative deal structuring.

Our fiduciary duties are exclusively with our selling client. In this regard we direct our acumen, our experience, and our efforts towards a professional brokerage consulting service that achieves the most advantageous transaction possible for the seller under the circumstances.

Core Broker Services

The principal objective of a broker is to serve the client while managing the brokerage process. In this regard we endeavor to:

- professionally manage the selling process while maintaining the confidentiality of the business;
- provide factual representations about the nature, operations and value of the business, keeping in mind that every statement to a buyer will likely be remembered and recalled;
- consult directly with the seller during each phase of the selling process;
- successfully integrate tax advice, financial accounting, valuation, negotiations, and strategy into a process which will benefit the seller’s position;
- assist seller’s attorney in orchestrating a successful closing transaction.

Seller’s Wants

- the highest obtainable selling price,

- as much cash as possible at closing,

- the fewest contract terms, conditions, and covenants,

- the lowest overall income tax liability, and

- the greatest security when owner financing is involved.

Seller’s Needs

-to deal only with qualified buyers,

-to maintain strict confidentiality about the practice,

-to incur the least amount of disruption during the process,

-to understand the process and participate as needed, and

-to remain affiliated with the operations after the sale, if desired.

Definition of a Practice Broker

The term “broker” is generally defined as any person or firm acting for another either on commission or for other compensation who engages in the securing of prospects interested in  the sale, exchange, optioning, or leasing of the property of a seller.  The property may be either the stock or the assets of the seller, or a combination of both stock and assets.  The broker may also serve to effect transactions and contracts (but not engage in the practice of law), as either a middleman or negotiator, secure or determine the value of property (typically at fair market value), calculate the results of the transaction (such as tax positions or cash flows), find or introduce financing by third parties, or otherwise act to hold together the intentions of a prospective buyer and seller.  The broker takes no possession of the subject matter of the negotiations, but may hold earnest or other trust monies.   Source: Wikipedia.

The broker and the seller decide the nature and extent of their respective obligations in a contractual agreement often termed a “Listing Agreement.”  In effect, the parties establish a broker-seller agency relationship pursuant to the Law of Agency.

The Brokerage Process

The brokerage process includes a series of steps and procedures which are likely, but not necessarily required, in a successful  transaction.  The process is not linear in that one step leads directly to a predetermined subsequent step.  Rather, there are starts, progress, withdrawal, and re-engagement of parties over extended periods of time.  The process, typically, necessitates frequent and intense interaction with either the seller or the seller’s advisors (e.g., an attorney or accountant).  Accomplishment of each step varies in length of time depending on the complexity of the aquired practice and motivation of the transacting parties.


Selling Memorandum

A selling memorandum is a written document the purpose of which is to explain succinctly the seller’s business.  A well written document communicates the following:

-it informs the buyer about the operational and financial aspects of the business in a clear manner.

-it enhances the due diligence process by allowing the buyer to focus on key matters.

-it indicates to a buyer that the seller is motivated as it requires the seller to focus on transactional issues.

-it serves to inform the buyer’s consulting group of advisors about the core nature of the business.


An accurate selling memorandum conveys the essence of the company, builds credibility, and serves to induce a buyer to participate further in the transition process.


Negotiation is the process where interested parties resolve differences, agree upon contract terms, bargain for individual advantage, and/or attempt to craft outcomes which serve their mutual interests.  The first step in negotiating is to determine whether the situation is in fact a negotiation.  The essential elements of negotiation is the existence of two parties who share an important objective but have some significant differences.  The purpose of a negotiation conference is to seek a compromise and, if possible, resolution of the differences.  

A skilled negotiator serves as an advocate for one party to the negotiation and attempts to obtain the most favorable outcome possible for that party.  During the process, he also attempts to determine the minimum outcome the other party is willing to accept.  When multiple issues are involved, differences in the parties’ preferences make win-win negotiation possible.

The negotiation process can be divided into seven steps:

-Preparing and Planning

-Setting the tone

-Exploring underlying needs

-Selecting, refining, and crafting an agreement

-Reviewing the agreement

-Reviewing the negotiation

-Capturing deal and relationship learnings

Skilled negotiators use many tactics including:

-       Conflict management
-    Concession patterns
-       Setting pre-conditions
-     Intimidation
-       Declining to speak first as to price
-     Fait accompli
-       Presenting demands
-     Take it or leave it
-       Time targets
-     Rejecting an offer
-       Good guy/bad guy
-     Decoys or red herrings
-       Limited authority
-     Nibbling
-       Caucusing
-     Cherry picking
-       Walking out
-     Salami tactics

Negotiating skills are required in every buy-sell transaction.  Our services in this arena serve to address expressed concerns, reveal legitimate issues, forge consensus and hammer out an arm’s length agreement.

Deal Breakers

Situations and circumstances that might cause a deal to break down include the following:

  1. A prospective buyer’s verbal representation should not cause the seller to become so exited that they ignore the intrinsic complications of a deal.
  2. The advising attorney, accountant, banker, etc. may interject more than an opinion into a potential deal, resulting in roadblocks to minor or solvable matters. 
  3. A seller may become stricken with “seller’s remorse,” or emotionally and psychologically withdrawing from the deal.
  4. Legitimate concerns over lawsuits and/or environmental or tax matters may prove to be too expensive for a particular buyer. 

Listen carefully to all buyer concerns.  Nonetheless, when an impasse is apparent, our experience may lead us to propose alternatives to a deal structure, including alternatives to an outright sale.

Seller Tips and Techniques

If you are a seller, then consider adhering to the following mandates, as they will help secure a successful transaction:

    -     Ask A Reasonable Price For The Business.
         An inflated asking price turns off potential buyers.  Determine the “fair market value”  
         and then price your business in line with this figure.

    -      Maintain Business As Usual.
           Remain focused on the day-to-day sales and operations.  Plan for adequate time to address buyer inquiries.

    -       Prepare For The Sale.
           Adequate advance preparation will yield long-term dividends.  Perform the needed  “housecleaning” at the      facilities and attend to necessary accounting matters

-       Anticipate Buyer Information Request.
The buyer will need appraisals on major assets such as real estate.  Make copies of at least three years of tax returns, the most recent financial statements, and depreciation schedules.

-       Strive To Get A Competitive Buyer Situation.
A good business priced properly will create interest from several buyers and create a competitive situation.  Leverage the circumstances to your advantage.

. -       Maintain Deal Flexibility.
All-cash at closing are the exception.  Consider accepting deferred payments.  Examine an offer from the buyer’s perspective.

-      Don’t Dominate Negotiations.
Maintain a cordial and professional demeanor even if the buyer fails to do so.  Understand when it is appropriate to “walk away”.

-      Maintain Deal Momentum.
Keep the inquirer’s interest and maintain the momentum.  Respond timely to
buyer’s questions and document requests.

-       Be Willing To Stay Personally Involved.
                Even if you are feeling burned-out, realize that the buyer may want you to stay      
                within arm’s reach for awhile.  Consult with business brokers to determine how you can best effect a smooth transition.

The Broker and the Buyer

Practice brokers prefer to talk to people in person.  During  a preliminary meeting or teleconference the broker will typically determine the following about the buyer:

-  Do you have the necessary funds to buy a practice?
-  Is the cash readily available?
-  Will the prospect sign a confidentiality agreement?
-  What is the buyers time-table for the aquisition?
-  What information is wanted first?
-  Will the buyer act expeditiously?
-  Will the buyer be personally involved in negotiations?

Subsequetn to determining these matters, the broker can then discuss the facts presented in the blind “Practice Profile.”  Steps through which the broker will lead the buyer are:

                -  The broker will provide the prospective buyer with additional information about
                   the practice, including certain financial data.
                -  The broker will arrange for the buyer to see the practice.
                -  Once the buyer has indicated strong interest the broker can then supply detail
                    financial information.
-  When the buyer is ready to proceed to clsoing, the practice broker will be the best
    source for addressing concerns, resolving loose ends, and offering a practice


broker’s unique expertise in consumating the practice sale transaction.


Brokerage Standards

General guidelines and responsibilities for dealing with clients include the following:

  1. Protect and promote the best interests of the client.
  2. Perform all services with honesty, care, and good faith.
  3. Represent only factual information to buyers.
  4. Maintain confidentiality of the seller’s proprietary information.
  5. Obtain terms and conditions of agreements in writing.
  6. Take the necessary steps to complete an assignment competently.
  7. Offer the client objective advice, recommendations, and analysis.
  8. Advise the client to make full disclosure of all material information.
  9. Conduct all negotiations on behalf of the seller in good faith.
  10. Keep the client informed of the status of all negotiations.

Work with the seller’s other advisors to structure a transaction in the client’s best interest.

Tips for a Better Sale

  • The decision to sell should be firm.
  • Decide early who is going to be the ultimate director of the selling process.
  • Partner with professionals knowledgeable about brokerage.  Improper advice can cost you dearly.
  • Set up a document file in one place for all relevant information.
  • If a buyer indicates he will submit a Letter of Intent, tell the buyer up-front what items you want to be included.
  • Settle all litigation and environmental matters before discussing the sale of the practice.
  • Be flexible with the real estate.  Most buyers would rather rent the facility, perhaps with an option to acquire.
  • The best deal for buyers is one in which a seller’s Note is used as subordinated debt.
  • Do not negotiate directly, but through an intermediary.
  • Don’t delegate important aspects of the deal to underlings.
  • Complexity is a killer in deal making.  The more complicated the deal structure, the less likely it is to work.
  • Valuation is an important exercise, but usually the value calculated is not the final purchase price.
  • Determine who the decision-maker is on the buying side.
  • Control to the greatest extent possible the drafting of the Purchase and Sale Agreement.
  • The essential features of any acquisition agreement are the following: representations and warranties, covenants, conditions precedent to the closing, and the indemnifications.
  • In negotiations, start with the less confrontational issues.  Seek initial agreement.
  • Avoid entering into contracts with marginally qualified buyers.
  • Always be prepared to negotiate.
  • Transactions may come apart at the Letter of Intent stage because new parties get involved in the deal and consensus becomes difficult.  Have experienced transaction attorneys and advisors.
  • Once you sign a Letter of Intent, your leverage drops dramatically.  Make sure it covers as many critical deal points as possible.
  • Deals involve three sometimes inconsistent objectives: speed, confidentiality, and value.
  • If the deal fails to be consummated, a great deal of confidential information has been provided to the wrong people.
  • Act with absolute clarity in all negotiations.  Allow deal breakers to surface as early as possible.


Note: Remember the ultimate success or failure of the business transition is the owner’s responsibility to stay involved.

© 2005 - 2010 Christopher S. Whitener CPA. All rights reserved.

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