How to Choose a Business Broker!
How to Choose a Business Intermediary, often called a Business Broker.
The advantage to using a Business Broker is primarily to gain access to his/her buyers, sellers and transaction experience. A good Broker will be able to help you price the business, know where and how to market it, screen buyers for you, prep you for showings, depersonalize the negotiations, have gigabytes of contracts to use and have the lending, legal and accounting contacts to help you close a deal. Selling a business is complicated and there’s a lot that goes into the process and using a Broker can save literally dozens, if not 100’s of hours.
Caution: Buying or selling a business is not like selling real estate. While there is standardization is the real estate world (showings, trips to the title company and cosmetic surgery), there is none when buying a business or selling a business and a huge difference exists in the expertise required to complete these transactions. A business has intangibles that could have substantial and often difficult to determine values whereas a piece of real estate is one simple asset with a known (or easily obtainable) value. A few tips that could help you with this very important decision:
1. Check for Certifications: This will tell you the area of expertise the Business Broker specializes in. Are they certified to sell businesses? A true Business Broker/Intermediary will have achieved distinguished certifications such as “Certified Business Intermediary (CBI) or Certified Senior Business Analyst (CSBA). Some may also be certified in other fields (Appraisals for example) helpful to selling businesses but it will not be their primary profession.
2 Check the associations: With whom does the Broker associate? Are those associations dedicated to selling businesses? Professional Business Brokers know where the qualified buyers and sellers are and how to reach them. If you’re a Seller, ask yourself; whom would a knowledgeable, qualified Buyer work with?
3 Visit their web site: Professional Business Brokers will love for you to visit their site. Take and look and see what their site is all about. Is it focused on selling businesses or is it just a button from some other industry?
4 What about Geography? Selling a business requires close contact with professionals. Look at the area the in which the Broker works with Sellers; he/she should be close to your business and beware of out of area Business Brokers representing local businesses. While its common to represent Buyers nationally and internationally, representing Seller’s requires a local Business Broker who knows the community, its economy, and infrastructure and is equipped to present your business in the most positive light. Ask the Broker if he/she will be there for each showing. Are the majority of his/her Seller listings in about the same region? Depending on population, most Brokers work about a 300-mile radius from their home office.
5 Watch out for industry specializations: Beware of Business Brokers who specializes in selling one type of business. There are many intelligent, qualified business people who invest in various industries and Brokers who specialize in certain types of businesses (accounting and health related are big examples) do not know how to market to a broader market of buyers. They tend to market only to related buyers (which can be the buyer of last resort). Many buyers, if not most, are looking for a career change and marketing to someone who is already in the profession is bottom fishing.
6 Use common sense: A professional Business Broker will have experience dealing in the types of businesses in your community and be a long-time resident. Use caution with those who claim to be venture capitalist or investment bankers who have generously decided to offer their (unrelated) expertise to you.
Were here to help, if you have questions/concerns about choosing someone to represent you when you decide to buy a business or sell a business, call us anytime and well be glad to discuss the matter in private.