The Vital Role of Business Brokers in Facilitating Successful Business Transitions for Business Sales


Bill Grunau

A group of people shaking hands at a meeting, symbolizing collaboration, and agreement.

Finding the right prospective buyer for our client’s business is just the beginning of a successful transaction and business transition from seller to buyer for a business broker.  Once your business broker successfully has an offer accepted, the work begins and there are critical steps to come in closing the transaction and business ownership transition.

Business broker services in a business sale transaction include preparing and presenting the LOI/Purchase Agreement, Negotiations, facilitating the Due Diligence Process, managing the escrow and closing.  These are all essential steps in a successful business transition from a seller to a buyer-new owner.  

LOI and/or Purchase Agreement
Reaching an agreement on the purchase price is only the first step in selling your business. Numerous other terms must be negotiated and agreed upon by both the buyer and seller. It’s crucial to define these terms clearly in the purchase agreement. Key elements to include are:

  • Financing: Specify the type of financing, such as SBA financing.
  • Due Diligence Process: Outline the period and timeline for due diligence.
  • Contingencies: Define all contingencies, including lease and financing contingencies.
  • Opening Escrow: Establish when escrow will be opened.

A well-drafted purchase agreement ensures that all parties understand and agree to the terms, facilitating a smoother business transition for the business sales transaction.

Poorly written or incomplete Letters of Intent (LOIs) and purchase agreements can lead to disagreements or misunderstandings later, often derailing transactions.

As your business broker, Pacific Business Sales ensures that LOIs and purchase agreements are meticulously prepared using the standard purchase agreement forms. We include all required addendums and specific deal terms tailored to your transaction.

Beyond preparing the purchase agreement, a crucial part of our Business Brokers services is negotiating the final agreement to the mutual satisfaction of both buyer and seller and ensuring it is signed.

At Pacific Business Sales we work directly with a number of SBA PLP (Preferred Lender Program) lenders.  We select the best lender for each transaction based on the type of business and each bank’s lending preferences.  For example, some banks will not lend on construction companies. 

When a lender issues a pre-qualification letter, the business, asking price, and terms have been reviewed by underwriting and the Credit Officer before the pre-qualification letter is issued.  This means that subject to a qualified buyer, the transaction is approved for SBA financing. 

The role of your business broker in SBA financing is to arrange the financing and coordinate the financing with the buyer and SBA lender.  At Pacific Business Sales we pre-qualify all our businesses for sale with at least one SBA PLP (Preferred Lender Program) bank.  

Due Diligence
With the LOI or Purchase Agreement signed by buyer and seller, the Due Diligence Process begins and is the next step.  There is no set Due Diligence list or procedure for acquisitions and small business sales.  Due Diligence processes and lists vary by industry type of business and the size of the transaction.

For example, Due Diligence process for a manufacturing business is entirely different from Due Diligence process for a contractor business or a distribution company.  Likewise, Due Diligence for a company with $1 million of revenue is very different from Due Diligence for a company with $10 million plus of revenue. 

The Due Diligence process for a small business is typically straightforward with a focus on determining the Discretionary Earnings, reviewing the tax returns, P&Ls, bank statements, etc.  Small business Due Diligence typically takes 3 to 4 weeks and is often done by the buyer and sometimes with the assistance of their CPA.  As part of our Business Broker Services during Due Diligence is facilitation, coordination, and guidance to both buyer and seller.  Due Diligence is usually a first-time experience for small business buyers and sellers, and while the business broker cannot perform Due Diligence on the buyers’ behalf, the business broker’s role in keeping everything on track is an important one.

The Due Diligence process on larger transactions is of course more comprehensive and sometimes includes a QofE (Quality of Earnings) report by an independent accounting firm on behalf of the buyer.  Larger transactions generally have a professional accounting firm representing the buyer and due to the complexity and detail involved, the seller’s CPA is usually involved as well. 

Business broker services and roles are the same, that of keeping everything on track and facilitating the process. 

Financing and lease contingencies are generally in work in parallel with the Due Diligence process. 

At Pacific Business Sales we work with the buyer to start SBA financing or other bank financing as soon as the LOI or purchase agreement is signed.  This is because in most transactions, SBA financing is the longest lead time item for closing. 

The leases are usually dealt with after Due Diligence is completed. 

Escrow and Closing
When Due Diligence is complete and the contingencies have been removed by buyer and seller, escrow is opened. 

Business escrows are very different from residential home purchase escrows and the escrow officer does much more than merely process the loan documents, titles, and closing.  In a business escrow the escrow officer performs lien searches on the business, obtains lien releases, if necessary, obtains tax releases from the FTB (Franchise Tax Board), EDD (Employment Development Department), and CDFTFA (formerly SBOE, sales tax dept). 

It is important to have an experienced business escrow company and escrow officer and one that is responsive.  At Pacific Business Sales we have carefully selected the best business Escrow firms with experience in the types of transactions our firm handles.  

Your business broker is involved in every aspect of a successful transaction from sourcing the buyer, to negotiating and writing the purchase agreement, Due Diligence, Escrow, closing, and business transition from Seller to Buyer (new owner). 

With over 20 years of experience, Pacific Business Sales provides comprehensive business broker services. Successfully selling your business and ensuring a smooth business transition is a crucial milestone for any business owner. Choosing the right business broker to guide you through this process is the first and most critical step.

Bill Grunau

About the Author

Bill Grunau

Bill has over 20 years of experience as a Business Broker specializing in industries ranging from manufacturing to construction/contractors, technology and software, B2B services, distribution-3PL, and healthcare. His transaction experience includes successfully closed transactions as both stock sales and asset sales including transactions with licensing such as contractors, healthcare, and companies with government contracts in Orange County and other Southern California locations. Bill works closely with a team of financial advisors specializing in tax strategies to minimize taxes on the sale of a business and are available to advise clients on how to minimize the tax liability on the sale of their business. Bill is the author of “Own Your Future, Straight Talk about How to Buy a Business and Build Your Future” Bill has a BS in Electrical & Electronic Engineering studying at Cal Poly Pomona and West Coast University and also studied at Claremont Graduate school EMBA program.