Buying and selling businesses is complicated work. It’s not like putting a computer up for sale on Craigslist. You need to find the right price for the company that both the buyer and seller agree on, fill out page after page of paperwork perfectly, and more. Even getting the buyer and seller to find each other is difficult work. Not only is this process complicated, but it’s time consuming, which is why most business buyers and sellers turn to professional help.
Business brokers specialize in making sure the sale of a business goes smoothly for both parties. This article will cover what you can expect from working with a broker, how much it will cost you, how to pick the right one for you, and all the tasks they will take care of.
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What is a Business Broker?
A business broker, also called “business transfer agents” or “intermediaries,” assist in the purchase of a business. They help buyers and sellers connect, and make sure they are a good match for each other. Business brokers act as a mediator for the sale, meaning that the buyer and seller never have to meet. Everything is done through the broker, making life easier for everybody involved.
Business brokers usually get paid when the sale closes. Commonly, their commission is ten percent of the sale, which does cut into the money the seller earns from the sale.
What Do Business Brokers Do?
In nearly every step of selling a business, a broker can get involved. From the initial “should I sell my business” moment to getting that big fat check, they are there to help. There are three major areas that their expertise is most useful.
Find Businesses for Sale
When somebody is looking to buy or sell a business, it’s hard to find a reputable place for them to be listed. Sure, there are some online resources like Bizbuysell.com, but many businesses are sold without ever hitting a public business selling site.
Business brokers have access to private listing services that contain many businesses for sale that the public can’t see. Part of the reason many business owners want to list on private services is because they don’t want their employees to know they are selling the business. That means getting a broker involved in listing the business and helping find the right buyer.
A good broker, when approached by a buyer, could also help identify businesses that might be open to selling their business but hasn’t listed it. Then, that broker could approach the business on the behalf of the buyer and give them an offer.
Know What a Business is Worth
Settling on a price, especially when a business is going to sell for millions of dollars, is going to be hard between a buyer and seller. The seller is going to try and oversell the business to get more money and the buyer will try to debate the price down.
The difficult part is figuring out how much a business is actually worth. There is no consistent sale price for businesses like there is for smartphones or a gallon of milk. Every business has its own strengths, weaknesses, assets and more. Business brokers have the expertise and understanding to properly price companies.
One major benefit brokers have, especially if they specialize in a specific industry, is knowing what similar businesses are selling for. That ability to openly compare can be a huge help in properly pricing a business.
Acting as the Middleman
Unlike like the process for common real estate sales, a business broker works with both the buyer and seller. Their goal is for both the buyer and seller to walk away happy from the transaction.
That means the buyer and seller never have to meet, the business broker goes between and meets with both individually. Negotiations won’t get heated, purchases can be made quickly, and the broker can make sure everybody is on the same page.
How to Find the Best Business Broker for You
Picking the right business broker can have a huge impact on your business sale. Having the wrong broker can mean getting ripped off, having the process drag out for too long, or even preventing a sale from going through.
When choosing a broker, make sure to ask questions. Find out how familiar they are with your business type industry that you are in. Ask how many businesses they have sold, and how many of those are similar to yours. Do they have any specific skills or experience that will make this sale go smoothly? Don’t just ask for their successes, but also their failures. Sure, they’ve sold 100 businesses, but how many deals didn’t go through? Find out their track record, ask to talk to people who have worked with them in the past, and do some independent research.
It’s also important to make sure you get along with your business broker. They are key to selling your business, which means you need to trust them. If they give you a bad vibe or rub you the wrong way, don’t go with them. Make sure that you like them and they like you. That way, you can openly communicate with them and can put your trust in their work.
Business brokers play a huge role in the buying and selling of businesses. If you are in the market to buy your own small business, regardless of size or industry, you should consider getting one. Likewise, if you are preparing to retire or simply want to sell your small business, a broker can make the process go much smoother. A good business broker can make sure the business is being sold for the right price, that all of the paperwork is done correctly, and help connect buyers and sellers.
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