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What is a business broker?

What is a business broker?

Based on the state, a business broker may have a license to Broker. Business brokers will estimate the value of a business, advertise it, and conduct interviews with prospective buyers.

If you have ever bought or sold a house, then odds are you have worked with a real estate agent. You may think of a broker’s role being very similar to a realtor. Only the Broker is helping you buy or sell a business, which is a much more complex task.

Agents can play a valuable function in the process as they provide guidance, advice, and other resources that you may need to make the transaction happen. Business brokers typically have years of training and experience buying and selling small to medium-sized businesses and, therefore, can supply you with expert guidance that can save you valuable time and money.

Agents are well connected with finance professionals, accountants, lawyers, and other professionals who may facilitate the sale. For vendors, business brokers can put together the marketing package, help determine the appropriate price for the business, and do all of the leg work necessary to market the place available. Even before the company is put on the market, agents can provide beneficial advice to correctly prepare the company for sale.

All these services the Broker performs allow the business owner to stay focused on what they do best — running their business. A broker can present to them motivated sellers and opportunities that meet their particular skill set, passions, and financial goals or goals for the buyers.

Agents usually work on a commission basis — typically, the commission is 10% of this company’s sales price (note that this can vary) — this commission is generally paid by the seller (as it is in the real estate arena).

Business Brokers set the rate to charge for their companies, but they seem to remain pretty much the same. Ten percent (10%) is the average rate, but it can be higher or lower depending on the individual Broker or the business being sold. This fee is based on the full purchase price and is paid to the Broker at Closing. The Listing Agreement For The Exclusive Right To Sell signed by the vendor will explain the fee in detail.

Because of the time and cost involved in going through financial statements and other information to prepare a marketing package and set a value on the business and help the vendor determine a fair asking price, together with confidential marketing and other expenses, some Business Brokers charge an upfront fee. This will vary according to the Business Broker and is usually deducted from the commission paid at Closing. Because there’s no guarantee a company will sell, some Agents decide to charge for their services until they have successfully sold the company. They take an opportunity of doing lots of work for no pay but believe they should not list a company unless they feel confident it will sell. That will cost the seller nothing extra, as the commission you pay your Business Broker will be shared with the other Broker.

1)Like the REALTOR designation in real estate, the company brokerage industry has a couple of established professional communities to hold the business to a higher standard. The most notable organizations are the International Business Broker Association (IBBA) and Mergers and Acquisitions Source (M&A Source).

2. Make Sure They Know Your Business + Size

No two businesses are alike. However, businesses in the same sector (such as two pest control firms ) share more similarities than a restaurant and a supply company. It is not a hard rule, but specialization can be an essential factor when selecting a business broker. Locate someone who has:

Sold a business in your business

Sold a business of your size

Sells businesses locally regularly

From understanding financials to marketing your business effectively and to the proper buyers, these three factors play a vital role in every aspect of selling your company.

3. Evaluate Their Public Reputation

What’s the best predictor of future behavior? Past behavior. A business broker’s reputation may be an essential feature to evaluate. That said, be sure to dig past your initial impressions. Fake Google reviewers have become a real problem over the last five years, and many companies are using their services to inflate their Google reviews.

The picture below is taken from Fiverr.com, a website where freelancers offer an assortment of services. Google is cracking down on those bootleg reviewers and penalizing the company owners who attempt to fortify their system, but it takes time.

Your very best option is to Google the brokerages in your area, read through their reviews, and ask anyone you’re seriously considering for past-client references. Since selling a business is such a personal service, the right firm will have plenty of happy customers vouch for them.

This is a critical step. Bear in mind that nearly everybody in the business says they have the complete procedure, the best negotiators, and the most sophisticated selling approaches. You will need to find those claims substantiated before you sign a listing agreement. We highly recommend asking for references from past customers.

4. Ask About Their Marketing Program

One of the most significant disparities between firms is the emphasis they put on marketing your business. Some firms have advanced strategies for dealing with your business, but others do little more than placing an advertisement on their site or an online business for sale website. While marketing your business online may be one element of a successful marketing strategy, it certainly should not be the only one.

If you want to get the best price and terms for your company (and who doesn’t?), you need a brokerage that can get as many qualified buyers interested in your business as possible. The more competition you can create around your business, the better your deal will go.

In our opinion, the only way to do that is with a high-quality marketing program.

At MainStreet, we create a blind profile, a detailed write-up on your company, and a professional marketing video (here’s an example).

Ask the brokerages you are considering to describe precisely how they market your business and ask to see examples of the marketing materials. If they speak about the marketing quality but have nothing to show as evidence, that is a red flag.

Here is an example of a marketing video:

5. Go With Someone You Trust

Trust your gut and find a broker you are familiar with. Promoting your business is a long process, and along the way, you will need to share plenty of sensitive information and have difficult conversations with your Broker.

Don’t trust any broker who tells you selling is going to be easy.

A good broker will be equipped to help you navigate all facets of a deal – from the logistical paperwork into the emotions of selling.

The right agent will have a look at your business and see more than dollar signs. They’ll see the workers, your reputation, how long you have been in the industry, and what it means to you and your loved ones.

A good broker will care about you and the heritage of your business.

Who you decide to employ is a big decision, but you’ve got everything you need to make an educated decision. Good luck, and please don’t hesitate to reach out with any questions!

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