What is a Business Broker?
A business broker is a person or a business that helps small businesses to get sold. They work with the business owner to get the best price for the business, while also helping the buyer to get a good deal. Business brokers usually work on commission and get a percentage of the sales price as their payment.
A business broker will help to determine the price of the business, make sure all the business’s accounting is in order, negotiate deals, and then go through escrow and close the sale.
They keep the deal confidential and ask any potential buyers to not disclose any part of the deal. They can also check to make sure the buyer has all the licensing and permitting in order.
Some brokers work alone, while others will work with a brokerage such as Endeavor Business Brokers to get the deal done the right way. Either way is a great way for brokers to work with you.
Business brokers can also talk with attorneys and other advisors, work with title companies, and overall make sure that the transaction will go as smoothly as possible.
The broker wants the sale to be complete with everything in order so that they get the best commission they can while helping both the buyer and the seller to get their best deals.
Tips For Choosing a Business Broker
1. Make Sure They Work with Business Like Yours
You will want to make sure that the broker works with businesses that have a similar size to yours. If they are mainly working with large businesses and yours is a small business, they might not be able to help you in the right way.
You want a broker that knows how to deal with businesses of your size.
You also want to make sure that they deal with businesses that are within your industry. If the broker deals mainly with manufacturing, and you are in the healthcare business, they will not be able to make a good deal for you.
You need someone who is knowledgeable in your type of industry.
2. Make Sure That They Have the Right Accreditation and Experience
You want to hire the best business broker, and they all have two things in common – they are accredited, and they have experience.
You want to make sure the broker has accreditation through the M&A, or Mergers and Acquisitions, which means they have at least three years of experience in the field, they have the proper education, and they have been the lead seller on at least three different sales worth over a million dollars.
They also need IBBA accreditation which means that they also have sixty-eight credit hours in business acquisitions and be able to show that they have taken the lead in at least three transactions.
3. They Have a Good Reputation
You want a broker that has a great reputation so that you know they will do the job right. This means that you have looked at online reviews and the reviews of previous clients.
You also want to look at their ratings from the Better Business Bureau. Make sure that they can give you references from their previous clients and that these references are not biased.
If the broker can not produce quality references, or if you cannot find good reviews for them, find another broker. If they have the experience that they should have, they should be able to provide all of that.
4. They Work Full-Time as a Business Broker
Make sure that your broker works full-time as a business broker – you need someone with that kind of experience. If they are only working part-time, they will not have the same experience even if they have been working for the same number of years.
You can look here to see what the average experience of a business broker is. If they have close to this many years of experience, you can probably trust them to know what they are doing.
You also need to make sure that they are charging the industry standard of between ten and fifteen percent of the sale as their commission. Part-time brokers might not even know that this is the industry standard and may not work as hard for you.
5. They Need a Marketing Plan
You want to make sure that the business broker has a strong marketing plan because some brokers only list your business online and wait for people to call.
You want a broker who does more than this. You can find out more about marketing plans for business here: https://www.sba.gov/business-guide/manage-your-business/marketing-sales. You want them to create a professional marketing video, a detailed description of your business, and a blind profile.
You will want to know what the marketing budget is to see how much the broker will market your business. The bigger the budget, the better the likelihood that they will market your business in a professional manner.
From the buyer’s side, you want to make sure that your broker is screening the potential buyers to make sure that it really will lead to a sale. They need to make sure that the potential has all the proper licenses and permits in place or can make that happen quickly.
You will also want to make sure that the broker can keep the sale of your business confidential while marketing it for sale. There are times when you do not want the sale of your business to be announced until it is sold.
6. They Are Professional
You want to make sure that you are working with a professional and not someone who is trying too high pressure to do something that you are unwilling to do.
You want someone who will listen to your comments, questions, and concerns in a professional manner and not look down on you for asking questions.
A good broker will be easy to work with and will welcome any questions that you have to show that they are doing the job you want them to do.
7. They Do Not Charge Hidden Fees
When you make a deal with the broker, you want all fees given to you upfront.
If they try to get you to sign a contract that includes extra fees that are hidden or that you did not discuss, find another broker.
8. You Trust Them
You need to make sure that you trust your gut and trust the broker. If your gut is telling you that the broker is not someone that you can trust, trust your gut.
It is easier to walk away from an untrustworthy broker before you get started.