- for Sellers -
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.
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;
- 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.
-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 ProcessThe 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.
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:
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.
Situations and circumstances that might cause a deal to break down include the following:
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.
- Maintain Business As Usual.
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?
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
broker’s unique expertise in consumating the practice sale transaction.
General guidelines and responsibilities for dealing with clients include the following:
Work with the seller’s other advisors to structure a transaction in the client’s best interest.
Tips for a Better Sale
© 2005 - 2010 Christopher S. Whitener CPA. All rights reserved.
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