Should I use a “Business Broker” or a “Transaction Advisor” for selling my business?

You are considering selling your business or someone has approached you to buy your business. Once you have a sense for the general differences between a Business Broker and a Transaction Advisor you will have a better sense of how their services help you to successfully achieve your goals.
While everyone’s business situation is unique the process of selling a business requires a number of skills, specific knowledge, and a high degree of commitment. Gathering the appropriate data, compiling accurate models and background resources, developing confidence in the business value, managing the overall process, and finding buyers can take a surprising amount of time, work, and skills.
You as the business owner have to decide how to engage the best “team” possible to successfully complete the sale of the equity.
We’ve heard of deals that were negotiated over lunch between educated and experienced buyers and sellers that lead to effective exchanges of payment and equity all done on the back of a napkin. While this might work for a very special few, please refer to our blog article from May 2011 titled “Buyer or Seller of the Business, Who has the Advantage?” for details on why this is not the best idea.
We also hear of cases where the business was advertised publically for sale and the staff quit, the clients left, and the bank called the credit line…not much to sell after that. In another case the business was strategically positioned to “profiled buyers” and a bidding war developed where the business sold for higher than asking price.
So, which type of service provider?
The marketplace has developed two primary service providers to help you sell your business; the Business Brokers & the Transaction Advisors. The biggest influencer for your decision will be the type and size of your business. You should understand what your typical Buyer would look like, how they will find you, or if you need to find them.
Regardless of the person’s title, every individual will develop their own system to complete transactions. For the sake of brevity we are referring to the generic common practice for two common service providers. 
Both Business Brokersand Transaction Advisors require:
1)      Some form of financial and current documentation providing evidence of sources of revenues, costs, assets & liabilities, and usually historical profits.
2)      An explanation of what your business looks like and the business model.
3)      Some sense of what the business looks like when you’re no longer working there.
4)      A sense for why you’re selling your “perfectly good business”.
Business Brokerstend to work along the following guidelines to achieve expectations (again…typically):
1)      Brokers like transactions with ready comparables for value reference. This information comes from a number of similar transactions to yours going on concurrently.
2)      Tend to base initial valuation estimates on rules of thumb built on those comparables.
3)      Tend to summarize the data and information provided into a standard format designed to allow the potential buyer to draw their own conclusions. i.e.: similar to MLS listing for homes.
4)      Tend to have a high level introduction discussion with the potential buyer and then have the business owner work through the process of point by point discussions.
5)      Tend to be a natural fit to the overlap of real estate and single location retail business operations. i.e.: consumer driven services like restaurants, car washes etc.
6)      Tend to take on the role of your “agent” which allows them to make commitments on your behalf. I.e.: as your “agent” your real estate agent has legal rights to represent you.
7)      Tend to share opportunities into the marketplace more along the line of the real estate model where various forms of blind advertising alert a broad range of potential buyers of the opportunity.
8)      Broker transaction size (as a general rule) tends to be smaller than other transaction advisory services. i.e.: Broker deals regularly have values less than a few million dollars.
9)      Average listing term: 60-90 days.
10)   Brokers typically do not charge Work Fees.
Transaction Advisors‘ typical process to achieve expectations (again…typically):
1)      Transaction Advisors require all the typical data and the necessary background documentation to support and prepare for the due diligence process.
2)      Tend to assemble broader financial models developing a number of formulas and calculations to support a formal business valuation based on several financial perspectives. 
3)      Typically develop a clear understanding of the business model in detail and learns the strengths and weaknesses within that model allowing them to strategically target specific discussions with specific buyers including identifying and cold calling them.
4)      Typically develop and manages the various strategies for negotiating with the multiple agendas of different types of buyers.
5)      Tend to interact with you and the buyers through a broad range of topics related to the transaction i.e.: business valuations, Human resources, modifying contemplated deal structures for tax strategies, deal financing, providing assistance to lawyers, etc..
6)      Transaction Advisors act as your team leader throughout the complete process including:
7)      Transactions tend to be larger. Transaction Advisory services range from multi millions to billions.  
a.      preparing the business to sell including appropriate valuations
b.      developing a comprehensive and accurate Confidential Information Memorandum
c.      profiling what the best buyer might look like, and identifying and contacting a target list
d.      strategically working to confidentially test the market for buyers, sometimes on an “invitation only” basis
e.      working very closely with the owners to work through the buyer qualification process
f.       manage negotiations, Letters of Intent, preparation for the final sale agreement
g.      working closely with tax advisors, legal advisors, and financial sources
h.      facilitating the completion of the successful “sale”
7)      Transactions tend to be larger. Transaction Advisory services range from multi millions to billions.  
8)      Average Engagement Agreement 12-24 months. 
9)      Transaction Advisors invoice work fees as all preparation work requires a considerable investment of time and expertise. 

Franchise Business Brokers:
There is a trend in North America for the franchising of the skills required to successfully operate a business brokerage business. The internal systems and procedures within those franchises strive to be built on the best practice model. While these tools are excellent resources to introduce individuals to process of selling their business there is no substitute for direct hands on experience completing transactions.
Who you choose to represent the sale of your business DIRECTLY impacts how successfully you will achieve your goal. 

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