Maximizing Your Success: The Power of a Skilled Business Broker

Selling a business is one of the most important financial decisions an owner can make. Whether you’re ready to retire, move on to a new venture, or simply test the market, a skilled business broker can dramatically increase your chances of success.

Business brokers specialize in guiding owners and buyers through the entire process of selling or acquiring a company. From confidential marketing to due diligence and closing, the broker acts as a trusted advisor to keep the deal moving forward while protecting your interests.

Who Does a Business Broker Represent?

Much like a real estate agent, a business broker typically represents one side of the transaction. In most cases, brokers represent the seller rather than the buyer.

Why? Confidentiality. Unlike selling real estate, advertising a business for sale publicly could damage relationships with employees, customers, vendors, or competitors. A broker’s role is to market the business discreetly and protect sensitive information while finding qualified buyers.

On average, a properly marketed listing generates 60–100 buyer inquiries over 3–12 months. From those, only a small percentage will be serious, financially qualified prospects. A broker’s network, marketing tools, and vetting process help narrow the field efficiently.

When a broker represents the seller of a business, their main responsibility is to identify potential buyers through various marketing channels, such as business for sale websites, digital marketing, and their own network. A typical listing generates 60-100 buyer candidates over the course of the sales process, which can last anywhere from 3-12 months.

Maintaining Confidentiality

Confidentiality is the backbone of a successful sale. A good broker ensures that only serious, pre-qualified buyers gain access to your company’s details.

• Every buyer signs a Non-Disclosure Agreement (NDA).

• Buyers provide background information and proof of financial ability.

• Only then does the broker share a confidential business summary and limited financial data.

This screening process saves time, protects your business, and helps avoid unnecessary disruptions.

All buyers are required to sign a Non-Disclosure Agreement (NDA) and provide background information to the broker. This information helps the broker assess the buyer's experience level and determine if they are a good fit for the business. Once the buyer is approved, they are given a summary of the business and limited financial information to help them determine if the opportunity meets their criteria.

Buyer-Seller Meeting

One of the most pivotal steps in the sales process is the initial meeting between the buyer and seller. This 60–90 minute discussion, held either in person or virtually, allows the buyer to ask questions and understand the story behind the business.

Following this meeting, serious buyers often move toward submitting an offer. At this stage, brokers may also request proof of funds or financing commitments to reassure the seller that the buyer is qualified.

Due Diligence

After an offer is accepted, the transaction enters due diligence—the stage where the buyer “tests” the business.

During this phase:

• Attorneys draft the Asset Purchase Agreement and related documents.

• A secure data room is opened for reviewing tax returns, contracts, leases, payroll, and other critical information.

• The broker coordinates communication, resolves issues, and ensures progress toward closing.

Strong broker management during due diligence can mean the difference between a deal that closes and one that falls apart.

Closing

The final step is closing. If bank or SBA financing is involved, approvals typically take 60–120 days. Transactions that also include real estate may take longer.

The broker works closely with lenders, attorneys, accountants, and both parties to ensure that all documents and conditions are in place for a smooth transfer of ownership.

Why Work with a Business Broker?

 Industry data shows that only 10–20% of businesses sell without a broker. With a broker involved, that number jumps to 25–30% or higher.

A skilled business broker helps you:

• Maintain confidentiality.

• Attract and qualify serious buyers.

• Negotiate favorable terms and price.

• Manage paperwork and deadlines.

• Keep the deal on track from start to finish.

Ready to Sell Your Business?

Contact Playbook Advisory today for a confidential consultation and learn how we can help you maximize value and successfully navigate the sale process.

📞 (773) 243-1603 | ✉️ info@playbookadvisory.com

 Additional Reading:

7 factors to consider when selling your business?

 When buying a business here are strategies that work

An example of purchasing a business with SBA financing

Unlock the Door to a Profitable Future with this One-of-a-Kind Digital Marketing Agency

Active Listing - 2021

Are you in the market for a thriving and well-established digital marketing agency? Look no further! A rare opportunity has arisen to acquire a top-performing agency located in the heart of the Midwest.

With over 15 years of experience and a highly skilled team of designers, developers, and project managers, this award-winning agency has carved out a reputation for delivering outstanding results to its clients in the consumer, healthcare, and industrial sectors.

The company recorded impressive revenue figures of over $2 million in 2019 and is projected to see growth of 2-4% in 2020, according to the seller. This presents a unique chance for a savvy buyer to take the reins and steer the company towards even greater success.

What sets this agency apart is the dedication and commitment of its team, who are driven to continue expanding the client base and driving growth. This is a rare find in the world of M&A, and one that should not be missed!

Don't miss out on this exciting opportunity. Contact Jim Peddle, the business broker, directly at president@playbookadvisory.com or 312-525-9622 to learn more. Please note that all buyers must be vetted and approved, so allow 24-48 hours for this process.

From Search to Success: Buying a Business with SBA Financing - A Real World Example

How to Structure a $1.8mm Transaction with an SBA Loan for Business Acquisition

Further Reading:

Author - Jim Peddle, Business Broker

Are you considering buying a business but unsure where to start? Understanding the nuances of acquiring a business, from finding the right opportunity to securing financing, is crucial for a successful transition. Every purchase journey is unique, yet there are common steps and considerations that all prospective buyers should know. In this article, we delve into these critical aspects, using a real-world example to illustrate the process. We'll also provide a detailed breakdown of the costs, fees, and commitments involved in securing a lender, ensuring you have all the information needed to navigate your business buying journey confidently

The Deal Structure

First, a breakdown of the transaction;

• Purchase Price - $1,800,000

• Buyer Down-payment - $360,000

• Loan Amount - $1,440,000

• Earnest Deposit - $15,000 (Paid by Buyer at Letter of Intent)

• Working Capital Line Drawn at Closing $160,000

• Interest Rate - Prime Rate + 2.75%

Fees Charged by Lender

Lenders charge the borrower fees at closing as well as at application for an SBA loan. Buyers should always require a written commitment letter from the lender that breaks down the projected costs of the transaction.

Buyer Deposited $5,000 with Lender upon signing the commitment letter.

• Guarantee Fee Paid to Lender - Typical 3% or $43,200

  Note: SBA charges an upfront fee as well as an annual fee based on the loan balance. Currently, this rate is 55 Bps (.55).

• Lender Legal Fees - $5,000

  These charges are paid by the borrower to the lender for the loan only.

• Lender Processing Charges: (Bank fees will vary from bank to bank)

  Lien Searches $1,195.22

  IRS Transcripts $25

  Packaging Fees $2,500

  Wire Fees $150

• 3rd Party Business Valuation $2,500

• Site Inspection - Business $130

  Total Fees $54,700.22

  Note: Fees are financed within the loan

Working Capital - Other Adjustments

In most transactions, the lender will establish a line of credit for the borrower that is to be utilized by the borrower for working capital. There are no restrictions on this line of credit as long as the funds are utilized for business purposes. Rates can vary by lender but are the terms are variable and also tied to the prime rate.

• Amount of Working Capital at Closing $160,000

Customer Deposits

• $190,000 of Customer Deposits Credited at Closing to Buyer

Summary

In this real-world example, the buyer successfully completed the acquisition with a net payment of less than $10,000 at closing. This amount was achieved after accounting for a line of credit for working capital and adjusting for customer deposits. It is important to note that this figure does not include the buyer's attorney fees, which were not disclosed in the transaction details.

For more information on SBA financing or details on purchasing a business contact Jim Peddle, Business Broker, Playbook Corporate Advisory, Inc.

Further Reading:

• What is Seller Discretionary Earnings?

• Buying a Business- Moving to Entrepreneurship

• Best Practices for Business Buyers Meeting with Sellers

---

---

From Application to Approval: The 3 Must-Have Components for a Winning Business Loan Structure

In the world of business sales, brokers play a crucial role in guiding buyers through the process of acquiring a new business. At Playbook Advisory, we have been brokering business sales for the past 9 years and have seen a common trend among our buyers – almost 100% of them have purchased at least one real estate property, usually their primary residence. This experience proves to be helpful as these buyers move on to the financing stage of buying a business.

As a former mortgage broker, I understand the importance of educating buyers on their options for structuring a business loan. In my experience, financing a business is similar to purchasing a home and buyers need to be made aware of this. By instilling confidence in them, we make the process smoother and increase the chances of a successful transaction with their business acquisition lender.

The majority of businesses sold at Playbook Advisory are financed using a combination of three key components – a bank loan, the buyer's down-payment or equity injection, and a secondary loan from the seller, also known as a "Seller Note." This combination provides a flexible and well-rounded approach to financing a business purchase.

Let's delve deeper into these three components of structuring a business sale.

1. Bank Loan A bank loan is typically the primary source of financing for a business purchase and is usually an SBA 7A loan from a local banker. The lender will underwrite the purchase and assess the cash flow generated by the underlying business being purchased to determine if it is sufficient to cover the loan payments. The loan amount will typically be around 75-80% of the purchase price, similar to a home purchase.

For the loan to be approved, the cash flow, or Seller's Discretionary Earnings (SDE), must be greater than $150,000. If the SDE is less than $150,000, there are alternative options, which we will explore in a separate article.

It is important to note that terms for SBA 7A loans are competitive, so it pays to shop around and compare offers from 2-3 lenders before making a decision. Obtaining term sheets from each lender will give you a better understanding of the terms and conditions of each loan offer.

2. Buyer's Down-Payment: The buyer is expected to come to the table with a minimum of 10% of the purchase price but ideally, they should have 20% available in savings, retirement plans, IRAs, or real estate equity. Having a working spouse can also be beneficial as their secondary income can support household bills and monthly obligations, such as mortgage payments, school tuition, car payments, and other expenses.

3. Seller Notes: At Playbook Advisory, we encourage buyers to consider using seller financing as part of their business purchase financing strategy. Seller financing, in the form of a "Seller Note," is similar to a home equity line of credit (HELOC) that homeowners commonly use when they put less than 20% down on a home. The banks loan is ahead of the Seller Note which can cause issues with Sellers concerned about getting paid. Finally, there may be standby provision that does not allow the Buyer to make payments on their note until the first loan is paid down substantially or paid off entirely.

When a buyer sends us an initial letter of intent, one of the first things we look for is the amount of seller financing they are requesting. All of our business brokers are used to advising clients that they should be prepared to finance a portion of the deal, as seller financing provides numerous benefits. However, it is not uncommon for sellers to be hesitant about providing financing, as there is a risk of not being paid back. With lenders increasingly requiring full standby (no payments) for up to 5-7 years, sellers may feel nervous about this aspect of the deal.

In conclusion, prospective buyers should start talking with lenders and their business brokers as early as possible regarding their financing plans. By doing so it ensures a smoother process and leads to a successful closing.

Why You Need a Mergers and Acquisitions Attorney

“Who you engage to handle your legal issues in a business sale is really significant and I often see business owners choose an attorney who doesn’t have the transactional experience required to handle the deal. ”

— Jim Peddle, President, Playbook Advisory

If you’re the owner of a small business that’s interested in merging, acquiring or being acquired by another business, you need the proper legal support to ensure that you are getting the best deal possible.  These transactions are risky, but an experienced mergers and acquisitions attorney will earn their fees by minimizing risk at every stage of the transaction.  That’s why your Mergers and Acquisitions Attorney, along with your Business Broker and Accountant (CPA), should be a key player on your team whenever your business changes its structure.

What Can a Mergers and Acquisitions Attorney Do for You?

Your mergers and acquisitions lawyer will thoroughly research the other business so that there are no last-minute surprises.  They will conduct the negotiations over price and terms, drafting memorandums of understanding or letters of intent, so that you and the prospective buyer can see if there is a true meeting of the minds. The best mergers and acquisitions attorneys will get you to take off your rose-colored glasses as they explain the risks of the deals and ways to mitigate them.  They will review the contracts, such as a purchase agreement, to ensure that they adhere to all federal and state laws. Some deals will require the preparation of confidentiality and non-compete agreements or memorandums of due diligence.  They will prepare the company for the transition and advise you about your fiduciary duties and shareholder rights under the new business arrangement.

Mergers and Acquisitions Attorneys - From Start to Finish

Some business owners think that they don’t need to hire a Mergers and Acquisitions attorney until it’s time to close the deal.  This would be a serious mistake.  The best mergers and acquisitions lawyers come into the process early in order to help answer legal questions for a potential sale of a business. For example, they can explain the different options such as an asset sale vs. stock sale. In addition, tax or debt considerations or human resources issues (wage & overtime disputes) might mean it makes more sense to create a new business entity in a merger, winding down the existing companies.  Throughout the process, Mergers and Acquisitions attorneys keep an eye on all of the legal ramifications enabling you to focus on running your business all the way to a successful closing.

 To learn more about the benefits of an experienced M&A Attorney contact, Jim Peddle, at 312-525-9622 or by email at president@playbookadvisory.com.

 If you are interested in discussing your business with one of our attorney referral partners feel free to reach out to any of the three listed below;

Attorney Recommendations for Buyers & Sellers:

 Chicago Area Attorneys:

• Tom Winkler - Schaumburg, IL. ( Website)

• Jordan Uditsky (Website)

• Markus May (Google)

Outside Chicago:

Contact Jim Peddle for Attorney recommendations outside Chicago

Other Reading:

What to Know about SBA Loans

How Deals Get Structured

Low Voltage Installation Company - Updated 2019 Financials

Listing Price $587,000

This 20+-year-old company services both small to large companies all over the Chicago area. The company is a non-union service provider that can handle all types of low voltage projects for clients. They have over the years serviced many industries as well as schools with all of their cable and wire needs.

The company has generated increasing revenues in 2019 and 2018 due to an increase in budgets and growth in the economy. Excellent opportunity for a new younger owner to step in and drive the direction of the company by leveraging its outstanding reputation and history of service.

Seller will train and transition the business to the buyer. Some seller financing available to qualified buyers. The deal has been pre-approved for SBA financing.

Contact Jim Peddle the listing business broker for more information or go to our active listings page for other opportunities.

Other Active Listings:

Request NDA from Broker

An Explanation of Discretionary Earnings ("SDE")?

"In the business world, the rear-view mirror is always clearer than the windshield."

Warren Buffett, Berkshire Hathaway, Chairman

 What is the Purpose of Seller Discretionary Earnings? 

Author: Jim Peddle

Understanding Seller Discretionary Earnings in Business Acquisitions

As a seasoned business broker, I frequently assist buyers in understanding the financial intricacies of businesses for sale. A significant aspect of this is explaining Seller Discretionary Earnings (SDE), a critical metric in our Confidential Offering Memorandums. Here’s a primer to help demystify SDE.

Transaction Assumptions:

• Asset Sale: Buyers typically acquire both the business and its assets, excluding cash, accounts receivable, and accounts payable. Negotiations may include working capital as part of the deal.

• Debt-Free Purchase: Buyers usually acquire the business without assuming any of the seller’s debt. Interest expenses are added back into the SDE since they aren’t inherited.

• Owner-Operated Business: We expect new owners to be actively involved. Absentee ownership requires a full-time manager, potentially reducing the business's sale price due to higher operating costs.

Understanding Add-Backs:

Add-backs are adjustments made to the reported net income to reflect the true profitability by removing owner-specific expenses. These can include:

• Personal benefits such as health insurance, vehicles, and travel expenses.

• Non-recurring expenses like one-time repairs or legal fees.

• Non-operational expenses such as interest payments.

Critical Aspects of SDE:

• Financial Documents: SDE calculations start with tax returns, but reviewing internal financial statements is crucial, especially if they differ from accrual-based official returns.

• Verifiability of Add-Backs: All add-backs should be clearly justified with documentary evidence like receipts.

• Comparative Analysis: Always compare like with like; for instance, internal profit and loss statements against tax returns to ensure consistency.

• Depreciation and Leases: Understand the treatment of depreciation and any equipment leases that may affect the SDE.

Common Areas of Dispute:

• Owner Compensation: A frequent point of contention is whether the owner's entire compensation package should be added back. Industry practice often differs from buyers' perspectives, especially when considering the necessity of a full-time manager under new ownership.

Example SDE Calculation:

Consider an owner's compensation structure:

• Salary: $50,000

• Add-backs: Phone: $1,000, Health Insurance: $7,000, Payroll Tax: $4,350, Auto: $7,000, Other: $2,100, Distributions: $125,000

• Total Adjusted SDE: $196,450

Conclusion:

Understanding the financials of a business is imperative for making an informed purchase. Prospective buyers should engage with qualified CPAs and not shy away from deep diving into the financial histories presented. This diligence ensures that the business's displayed profitability is accurate and sustainable.

For further inquiries or guidance on buying or selling a business, feel free to contact me, Jim Peddle, at 312-525-9622 or president@playbookadvisory.com.

 

 

---

---

---

Playbook Advisory Sells Wood Manufacturing Company

Exclusive Listing Generated 39 Buyers

“Our firm was selected as the Business Broker because of our past success working with the Sellers Attorney. It’s great working with Sellers who understand the value a firm like ours brings to the table. Our Success Fee Only model resonates with clients.” stated Jim Peddle, President, Playbook Advisory

Playbook Advisory announced the sale of another Chicago area company that was exclusively offered for sale by the firm. The second generation family owned business was marketed to Playbook’s extensive buyer network and went under contract in under 90 days. The listing quickly generated 39 buyers which resulted in 5 buyer meetings, three offers and a signed Letter of Intent (LOI).

“Confidentiality was very important so we worked outside normal working hours to deliver the results the Seller demanded. We successfully made it to closing without employees, vendors or customers learning of the pending business sale.” added Mr. Peddle.

If you are a potential seller of a family owned business contact Jim Peddle directly at 312-525-9622 to learn how we assist with the sale of a business. View more information at https://www.playbookadvisory.com/sold-listings/

---