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Selecting A Business Broker To Sell My Business: What Should I Look For Them To Do?

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Comments & Replies: 3     Views: 3857     Posted By: Peter Siegel MBA  Peter Siegel MBA: BizBen Founder, ProBuy/ProSell Program Director



Topics: Business Brokerage, Business Opportunities, Selling A Business     Tags: business brokers, selling a business



What should your business broker do for you to successfully sell your business? Well, there's many things that a qualified business broker can and should be doing for you. Here are a few key ones:

Keep a Secret: Your broker should be good at keeping a secret. Keeping a sale confidential is essential to your success. A business broker should ensure all safeguards are in place to protect your company. One word to your suppliers, employees, or customers that you are selling the company can have repercussions on your business operations.

Deliver an Effective Marketing Plan: Just because a business is for sale doesn't mean it's going to sell itself. Selling your business is all about the right marketing. Properly positioning the sale of your company to attract and motivate as many business buyers as possible should be your goal.

Allow You to Avoid the Pressure: Selling a business is not an easy decision and once that decision has been made the process doesn’t get any easier. A Business Broker should assist you and let you take the time to learn and clarify all uncertainties to avoid the pressure you may feel in a complex transaction.

Keep Costs Low with No Heavy Front Fee: Business broker fees typically range from 10 to 15% commission of the sale price OR a flat fee of $10-$15,000 if the business’ sale price is less than $100-$150,000. Avoid any broker asking you for a large, upfront fee to assess your business value or start an application process.


Peter is absolutely right about what a professional business broker should be doing for the seller.

In addition,

An Iron-Clad, No-Ambiguities Non-Disclosure Agreement ("NDA"); In order to assure that the confidentiality requirement has some teeth in it, make sure that the broker's NDA is clear, unambiguous, and strict.

Tips in Building the Value of the Business: A business broker with experience as a business owner and expertise in business development can assist a business owner in short-term "tweaks" that can significantly improve the actual and perceived value of the business for sale. Be sure to ask.

Services with No Upfront Fee: As Peter pointed out, there are still some business brokers who charge a "set-up fee" or "non-refundable retainer" of thousands and tens of thousands of dollars (plus an eventual "success fee" commission) to do what reputable brokers will do at no cost, for the opportunity to earn a commission if and when the business sells. Even worse are those brokers who charge a monthly "working fee" for as long as the business is on the market, plus a commission at the end.--What incentive do they have to sell the business? While this arrangement might be acceptable for investment bankers handling deals in the tens of millions of dollars, it is not appropriate for the under-$10-million small business market. Wouldn't we all like to be paid in advance with no promise or guarantee of success! But, a true professional will have enough confidence in the competence of his/her services to be paid only upon successful completion of the sale.

A Realistic and Supportable Valuation: The same "bait and switch" happens in residential and commercial real estate sales--the broker suggests a high and unrealistic listing price with no rationale behind it in order to entice the business owner into listing with that broker. I regularly provide business sellers with a sensible and realistic opinion about the range of prices the market is likely to support; but, many factors affect an offer price, including the type of buyer submitting it. Together, the seller and I decide on a price supported by a rationale--a certain return on investment (ROI), or a multiple of SDE, or a percentage of gross revenues, etc.--that is supported by comparable sales, economic viability, and common sense. Don't be fooled by the broker who tells you your $300,000 business is worth a half million dollars and, then a month into the contract will tell you to lower it to $250,000. Any seller who would like an objective and realistic assessment of the current market value of their business is more than welcome to consult with me without obligation.


Contributor: Due Diligence, Valuations Advisor

I can agree (almost) with much of what has been previously said here but would like to add a few insights from my personal experiences.

There are huge differences in the quality of products and services offered . I have previously sold an accounting practice and paid a fee of 10% of the sales price to a broker who's contribution to the process did not extend much beyond maintaining a website.

On the other hand if the business you are selling is in the middle market paying for an independent business valuation as well as a professionally produced business review can make sense. The broker is in a conflict of interest situation in the valuation process.

I have also seen confidential business review products purchased at fees in excess of $10,000 (non refundable ) that failed to correctly identify the name of the business or properly recast earnings. Ask for examples of work product.

When talking to broker get a sense of their background beyond business brokerage...If they have previously sold houses , or toasters that should give you pause. Business brokering ( at least as I see it ) has little to do with selling and much to do with analysis and positioning of the business. Education matters and quite frankly is lacking in the industry.

Find out if you are in fact dealing with the broker or a salesperson. Visit their office. It should be reasonably local to you or that in itself is problematic.


  Helpful Resources To Assist In Selling And Buying California Businesses
Willard Michlin, CPA, Certified Fraud Examiner, Due Diligence Services

Willard Michlin, CPA #106752, offers buyers step by step training & assistance in doing Due Diligence Services when they are thinking of making an offer, or are in process of investigating a business purchase. He helps to determine the actual net profit even when there is cash. Call 805-428-2063.

Mark Chatow, Esq.: Legal Services For Buying, Selling Businesses

Mark has a broad range of small business purchase & sale experience from analyzing potential acquisition targets to successfully guiding buyers and sellers through the purchase & sale of small businesses. Mark can assist with contracts, negotiations, legal matters, etc. Reach Mark at 949-478-8393.

Diane Boudreau-Tschetter: Escrow And Bulk Sale Services

California Business Escrow, Inc. is a full service independent escrow company serving all of California and has expertise in a wide range of escrows. Our team prides itself on providing an exceptional escrow experience. For more info phone Diane Boudreau-Tschetter at 888-383-3331 or 209-838-1100.

Brad Steinberg, Broker - Laundromat Specialists

Laundry specialists - founded in 1968 by three laundry professionals, PWS is a family-owned corporation. Through the years it has grown to become the largest vended laundry equipment distributor in the United States. Call Brad Steinberg at 323-721-8832 to sell or buy a coin or card laundromat.

Helen Yoo: Escrow & Bulk Sale Services - Southern California

New Century Escrow, Inc. is a fully licensed & bonded independent escrow company. Over 20 years combined experience in handling bulk escrow transactions. Multi-lingual staff that speaks your language, including Korean, Chinese, Vietnamese. Call Helen Yoo direct at 626-890-1151.

Elizabeth McGovern: Escrow Services - SF Bay Area

McGovern Escrow Services, Inc., is a leading independent escrow company. We are a trusted partner with our clients, assisting them through the tangled bulk sale & liquor license transfer process. We provide attentive, quality & innovative customer service. Phone Elizabeth McGovern at 415-735-3645.

Janet Carrera - Escrow & Bulk Sale Services - SF Bay Area

Redwood Escrow Services, Inc. is a full service, licensed independent escrow company. We are EAFC Fidelity bonded, fully insured & licensed with the Department of Corporations. Committed to offering our clients the most comprehensive variety of escrow services available. Phone Janet at 510-247-0741.


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