3 Key Points That Business Brokers Need to Know

3 Key Points That Business Brokers Need to Know

Doug Robbins, founder of Robbinex®, has established himself as a leader in the business brokerage industry over the last few decades. Having been involved in the successful sale of hundreds of businesses, Mr. Robbins knows what it takes to get buyers and sellers together. In this article, we’ll look at some of the key facts that Mr. Robbins feels you should keep in mind when helping clients sell their businesses. These ideas were part of his recent BBP webinar entitled “Accepting Offers Instead of Selling Businesses with Doug Robbins.”

1. Establish Realistic Expectations

Robbins points out that people working in this industry have a lot of diverse challenges. Topping the list of challenges that Business Brokers face is, as Robbins phrases it, “Sellers have a lot of unrealistic expectations.” You’ve likely already run into this quite a bit in your work. Those expectations are not just the result of their own beliefs and misconceptions regarding their businesses, but also include misguided advice provided to them by friends and their various experts.

Business valuations are immensely important. However, Robbins stated that he has never sold a business for its valuation, as the process is complex and a great deal goes into determining the ultimate value of a business. Establishing a value is essential for helping to set realistic expectations on the part of the seller.

Robbins provides sellers with a comprehensive report, which includes everything from market research value and enhancement opportunities to an analysis of a business’ strengths, weaknesses and threats. This can help give the seller an accurate picture of the business’ true worth.

Many additional factors are included in the comprehensive report, such as customer and supplier reviews, a look at the business’ equipment, technology, and a three-year look into the future discount of cash flow. An analysis of a company may also include corporate history and its structure, major customer suppliers, key personnel, monthly revenues, working capital and more.

2. Creating Strong Relationships and the Three C’s

Robbins points out that creating a trusting relationship with the buyer is key. He is referencing the fact that the buyer should always view you as being capable and competent. You should clearly understand the business that you are trying to sell, and at the same time, understand the needs, goals, and desires of the buyer.

He explained, “Most buyers don’t think much of brokers, but the “three C’s” in the form of competence, compassion and communications will shift a buyers’ thought process as to who you are.”

3. Evaluate The Three M’s

You as well as your sellers should also be looking for information from buyers. In particular, you should have good answers for the “three M’s,” or money, management, and motivation.

Does a prospective buyer have the money? Do they have the management skills? And what is motivating them to buy a specific company? Remember that sellers have often spent decades or even the majority of their working years on building a company. As a result, most wish to see the company carry on successfully after their departure. In short, sellers want to know that they are turning the keys over to a competent and ready new owner.

Not surprisingly, the pricing of a business is a hugely important issue. Mr. Robbins notes that Robbinex® does not publish the price of a business. Instead, Robbinex® publishes a range of key information such as revenue, EBITDA, geography, the type of product or service and other key information. Obviously, you also should never lose sight of the fact that confidentiality is of paramount importance.

It’s essential to build a strong foundation of knowledge. When you have knowledge in every aspect of your profession, as well as knowledge of the businesses you are selling and knowledge as to the needs and goals of buyers, it will go a long way. By demonstrating your knowledge and understanding the needs of all parties involved, it is possible to achieve consistent levels of success.