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7 Ways To Get the Most From Your Business Broker

Working With Business Brokers

Chances of success in business sales multiply dramatically when owners and brokers work actively together through the entire process. I find that many automotive owners (and sellers in general) feel so engulfed in running their shops that they do very little to help the broker along the way. They presume their broker "does all that sales stuff."

Many owners tell themselves, hey, if I'm paying this guy a hefty commission, he better work for it. Which is true. Still, there is no commission if there is no sale. And we brokers are well aware of the prevailing statistics - more than 70% of business listings don't sell. That creates a pecking order, a priority system in the broker’s mind. You may not know it but it's possible the broker has you pegged as a business with a very low probability to sell and isn't spending any time on your listing.

Here are 7 ways sellers can get the most out of their brokers and increase their chances of crossing the finish line.

Verify the Marketing: Sadly, the vast majority of brokers do very little to actively and actually market your business for sale. In our internet universe, it's become almost standard practice for many brokers to post their business listings on a small handful of websites, then sit back and hope for the best. It’s important to understand what marketing methods are actually being employed. Ask if he does email blasts. Direct mail. Phone prospecting. In-person canvassing. Has he asked you which employees, competitors or neighbors may be important to call as potential buyers? And does he know who NOT to call to protect your confidentiality?

Consistent Contact: A broker will work harder when someone is watching. Most of us will hate to admit it but it's a simple reality. Owners will get better service, greater sales exposure, and ultimately better results, when they remain actively involved in the marketing and sales process. You should not go more than two weeks without speaking with your broker, even if it's simply to get a marketing update.

Information Check: Before hiring a broker to represent you and your business, ask detailed questions about how they market your business, how they find buyers, and how they will present the information. Make sure you review and approve the flyers, executive summaries and marketing pieces that go out. Don't presume the broker is getting it right. They often don't.

Anonymous Checkups: There's nothing wrong in a business owner checking up on his or her broker from time to time. Have a friend or colleague anonymously inquire about your business. See if your broker is returning calls promptly, giving accurate information, pointing up the benefits and advantages of your business. Determine if your broker is properly "selling it." Let the broker know what you found.

Staging Your Business: Realtors spend quite a bit of time and effort "staging" a home before putting it on the market. They have sellers not only clean and unclutter the home but sometimes repaint, re-carpet or re-landscape. Business owners should do the same. Whether you’re selling an auto repair shop, restaurant, manufacturing facility, pretty much all businesses can look better and project a more positive image with minor cosmetic improvements. It may seem insignificant but it signals to potential buyers that the business is being cared for and gives them more confidence.

Pay Upfront Fee: I know many of my broker colleagues vehemently disagree with the idea of charging a retainer or any type of upfront fee to business owners. The practice is more common in larger M&A transactions and on the East Coast. The prevailing attitude here in California is that Main Street retailers and small business owners will be turned off by an upfront fee and view the broker as a crook or an opportunist. Brokers often resist the upfront fee because it discourages listings and puts pressure on them to perform. As long as it’s not a huge amount, owners will get better results when they and their broker are invested fully. Paying a small fee spurs action and creates cooperation in a way that is more than worth it.

Price It Properly: Do yourself and your broker a huge favor. Price your business appropriately. Have reasonable expectations. Don't expect the broker to achieve an unbelievable price. One thing sellers often don't consider - when they demand an inflated price and demonstrate they're not willing to come off it, the broker won’t have much enthusiasm for working on your deal. You're not likely to get great service.

It mostly comes down to consistent, honest communication between owners and brokers. When you invest the time, it's much more likely to end in a pleasing sales experience.

Brian Loring, CBBAbout The Author: Brian Loring has been a broker since 2005, closing more than $150 Million in business and commercial transactions. He focuses on the automotive sector, providing unparalleled service to owners of repair, body, smog, tire, brake and lube shops in the LA and Ventura County areas. Brian can be reached direct at 818-973-2755.

Categories: Business Broker Information, How To Sell A Business, Selling A Business

Comments Regarding This Blog Post

Brian, you make some really good points. One of the most easiest ways to get the most out of a broker is for a buyer to communicate that they trust the broker and visa versa. If the relationship is contentious then it makes selling the business that much harder. I understand that there are shady brokers out there, and I don't blame buyers for being cautious, but once they have found a broker that they trust, then by all means, let them do there job. One of the most important things that shows trust is an appropriate amount of time for a listing. If a buyer gives a broker 4-6 months on the listing contract, instead of 60-90 days, then the broker is much more likely to spend time selling it, because they are not afraid of wasting their efforts. Another way to help your broker is a decent amount of money in commission, this is not just to cover costs/marketing/time, but also it allows the broker to have enough money in the till to offer money to other brokers to get it sold.

Brian addresses some really important points about the selling/listing brokers activities. One issue is the question of an Upfront Fee. This is currently not the norm in California, but I know of brokers in other states who are experimenting with an upfront fee to "buy down" the commission. For example, if the broker and seller reach an understanding about the likely selling price (not necessarily the same as the listing price), the seller may pay 1% of that amount up front in exchange for a 2% reduction in the commission on sale, or 2% for a 4% reduction, etc. In other words, let's say the business is to be listed at $400,000, but the broker and seller expect it to sell for $350,000 and the commission is 12%, the seller could pay an upfront non-refundable "set up" or "retainer" of 2% ($7,000) in return for reducing the commission to 8% if and when it sells. Now the broker knows he has a truly committed seller and will be even more inclined to put in the extra effort to make the sale. And, the sale benefits from a lower cost upon the eventual sale.

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