FAQ’s for a Business Broker
Frequently Asked Questions
Should we hire Transaction Attorney, CPA and Escrow Agent to finalize a transaction?
It is important to have an experienced team of advisors working with you when you decide to sell your business. You do need to have a Transaction Attorney engaged as soon as possible in the process and we have several excellent choices for you to choose from. Most business owners have a CPA, and it is important that they maintain confidentiality if they are to be involved in the sales process. Determining where you will close the sale of your business is important and your business broker should have a list of those possibilities as well, but this isn’t something that needs to be done early in the sales process.
What types of businesses do you work with?
We work with business owners of manufacturing, distribution, and service companies in Texas and the surrounding states that have gross revenue of between $2 and $65 million. We do not work with franchises, restaurants, or business owners seeking bankruptcy relief.
How are you different from other business brokers in Dallas?
DBG Advisors goal is to get a business owner’s business on the right path for a lucrative exit. The process involves establishing a defendable sales price, preparing the business for sale, finding the right buyer, and managing the sales process to the close. Our strength is a blending of competence, integrity, and service.
What options exist for Business Acquisition Financing and how do you help secure loans?
After a buyer has located the business and finalized the letter of intent with the seller of the business there are generally three typical ways to finance the business acquisition.
- A Small Business Loan(SBA Loan) – These loans can be obtained from banks and other lending institutions anywhere in the United States. This process requires the buyer to provide their own personal financial information and well as the financial information from the business the buyer is seeking to acquire. This takes anywhere from 60 days to 120 days once the lender has received all the information needed to process the loan application. Usually, advisors and brokers can refer banks and loan officers that have done good jobs in the past, but they are not able to help the buyer secure the loan.
- Conventional Loans– These loans usually are harder to secure and have higher interest rates than SBA Loans, but they may be easier to secure if the buyer has a relationship with the bank or lending institution. Again,advisors and brokers are not usually able to help buyers secure these conventional loans.
- Owner Financing– In some rare cases the business owner is willing to provide the financing for the purchase of their business. There are several reasons for this, but the most frequent reason is that the owner is selling their company to a friend, relative, employee or management team that he knows well and trusts. In these cases, the advisor or broker can help the owner determine the kind of structure that would accomplish the goals that the owner wants to achieve. The advisor or broker can also provide the buffer between buyer and seller that can help facilitate the negotiation of the terms of the promissory note or interest rate that is established. DBG Advisors has and will help in this way.
Why is an NDA required and what information can be gained after signature?
Confidentiality is very important in the sale of a company. Business owners do not want the public or their competitors knowing about the possibility of the sale of their company because it could hurt their business and upset their current clients. A Non-Disclosure Agreements (NDA) or Confidentiality Agreement (CA) needs to be signed between the buyer and the seller to protect the business owner from any damage that could be done if the public knew the company was for sale.
Once an NDA is signed the seller is more comfortable disclosing information about his/her company. Things like name, location, operation details, ownership percentages, and private information. However, even with an NDA in place, the owner would still not be comfortable revealing their client list or other proprietary information that could be used by a competitor to their advantage. It is always wise to protect confidential information even if an acquisition is being discussed.
Once an NDA is signed the seller is more comfortable disclosing information about his/her company. Things like name, location, operation details, ownership percentages, and private information. However, even with an NDA in place, the owner would still not be comfortable revealing their client list or other proprietary information that could be used by a competitor to their advantage. It is always wise to protect confidential information even if an acquisition is being discussed.
Can you assist with management buyout (MBO)?
When business owners wish to sell their companies to the management team of their company it is always important to have an advisor and/or broker assist with the negotiation of the transaction. Most business owners do not have the experience or competencies necessary navigate the process of selling a company, much less their company. There needs to be an experienced advisor/broker who stands between the two sides of the transaction to help educate both sides and communicate for each side to the other. MBO’s can easily fall apart without this kind of assistance. DBG Advisors is uniquely equipped to provide this kind of assistance.
How does a buy-side broker get paid?
When a broker has been engaged by a buyer to help him/her find a company to buy, the parties sign a buy-side agreement that outlines the scope of work required in the engagement. In most cases, there would need to be an established target industry that the buyer is looking to acquire along with a geographical region for the search. There is usually a retainer paid by the buyer when an engagement letter is signed of between $5,000 and $10,000 depending on the size of the target companies. If the engagement is open ended and the search is wide without any specific companies identified, then the retainer could be paid monthly rather than at the beginning of the engagement. In addition, once a company has been identified and a sale has been negotiated the broker also receives a percentage of the sales price. In most cases this percentage is 5% of the consideration paid at closing. However, if the buyer has identified the target company and the buy-side engagement is more limited then the broker is usually paid a retainer and an hourly rate for consulting services provided.
Receive a Complimentary Book, Written by Dr. Nolan Duck
Dr Duck wrote this book for business owners in Texas who want to scale up and exit their businesses. It contains his experiences in selling companies over the past 15 years. Hopefully, it will help you prepare for your exit.
In this practical book, you’ll discover:
801 E Campbell Rd, #250L
Richardson, Texas 75081
(972) 200-0991
Richardson, Texas 75081
(972) 200-0991
3350 Silver Oaks
Abilene, TX 79606
(325) 647-3734
Abilene, TX 79606
(325) 647-3734
