When a business is losing money or barely breaking even, an owner’s natural inclination may be to shut down operations. However, even an unprofitable venture can potentially hold value in the eyes of the right buyer. While turning around an underperforming business presents risks and challenges, entrepreneurs and investors often have strategic reasons for taking them on. If you are struggling to make your business viable but believe it retains some salable assets or upside potential, partnering with an experienced business broker may be the most efficient path to finding a buyer and selling at a reasonable price.
Reasons you may want to sell include:
- Access capital you’ve invested to put towards more profitable ventures
- Avoid further losses associated with an underperforming business
- Shed ongoing responsibilities that are causing excessive stress
How a Business Broker Can Help
A business broker serves as an intermediary to market and facilitates the sale of businesses. Benefits of using a business broker include:
Expertise
A business broker brings in-depth expertise that can make the process of selling an unprofitable business much smoother. Their specialized knowledge includes:
- Industry Insight – A broker immersed in your specific industry understands typical models, competitive landscape, customer base, technologies, and other dynamics that impact valuations and buyer appeal. They can accurately position your company.
- Financial Analysis – Brokers are experts at extracting intangible value from hard numbers. For example, they can strategize adjustments to recast financial statements in ways that better reflect turnaround potential.
- Operational Assessment – Analyzing areas causing poor profitability allows a broker to develop plans for increasing efficiency, capacity utilization, and quality control. Communicating these in sales materials reassures buyers.
- Pricing Methodologies – Rather than just applying multiples against revenue or assets, brokers combine income, market, and asset-based approaches to derive pricing that maximizes perceived worth.
- Marketing Strategy – Brokers have established channels to reach the most likely buyers in a confidential manner that doesn’t jeopardize current customer relationships.
- Negotiations Skill – When structuring offers, brokers serve as experienced buffers between emotional sellers and savvy buyers to secure optimal terms.
- Due Diligence Guidance – Brokers also know the documentation buyers will request to validate operations, finances, compliance, and growth opportunities when considering risks.
Objectivity
Emotions often complicate business sales. A broker provides an impartial, market-driven perspective on your company’s value.
Efficiency
Brokers have pre-existing networks of qualified buyers. They handle tasks like creating marketing materials, fielding buyer inquiries and negotiating offers – saving you time.
Maximized Value
Through their connections and familiarity with the market, a reputable broker markets strategically to achieve the best price.
Confidentiality
If discretion is important, a broker can keep financials and sales discussions confidential under a non-disclosure agreement until negotiations are in the late stages.
How to Choose a Business Broker Factors to consider in choosing a broker include:
- Industry expertise – Select brokers highly familiar with your type of business. This enables accurate pricing and matching suitable buyers.
- Certification – Seek a broker certified through organizations like the International Business Broker Association or M&A Source. Certification indicates credibility and adherence to ethical standards.
- Online presence – The broker should have an updated, professional website indicating depth of experience in business sales.
- Referrals and reviews – Get references from past clients and review sites to gauge a broker’s responsiveness and sales track record.
- Personality fit – Since you will work closely together, ensure you mesh well with the broker’s communication styles and working preferences.
The Right Broker for An Uncertain
Selling an unprofitable business can be unpredictable. The right broker, however, can market your company’s potential and help you exit ownership on the best possible terms.
