What You Should Look for in a Business Broker
In Part I we went over the definition of a business broker and what they do. In this edition, I want to cover why you should use a business broker and what to look for when choosing one.
You should use a business broker to help you sell a business simply because a good business broker is more likely to get you the best value for your business. Notice I said “best value”. The reason is that the highest price may not be the best value of rate seller. Fro example, if you have to seller finance 100% of a deal versus an all cash deal at a lower prices, or is the deal structured to provide the highest after tax yield.
Benefits to Working with a Business Broker
- Confidentiality – A business broker will protect the identity of the company and contact the owner only after vetting a buyer for their ability to run and finance a deal.
- Business Continuity – Selling a business is time consuming. The owner needs to focus on running the business to keep or improve the value of the business.
- Reaching Potential Buyers – Business brokers have the tools and resources to reach the largest possible base of buyers.
- Valuing your business – Valuing a business is far more difficult and complex than valuing a house. Every business is different with hundreds of variables that have an impact on value.
- Balance of Experience – most business owners only sell a business once in their lifetimes. An experienced business broker has seen many closings.
- Closing a Deal – A business broker is in business to close deals. As such the deal will generally move faster and thereby lower the risk of employee problems and customer defection.
Questions to Ask When Looking for the Ideal Business Broker
So now that you know what a business broker is and what they do and why you should use one, what characteristics should your ideal business broker possess? First, do you like him? Second, what kind of background does he have? Have they owned a business, have they bought and sold their own businesses. What kind of reputation does her she have?
All of the above are very important questions along with how will the business be marketed. However, the threshold question should be “do you cooperate with other business brokers”. This is critically important because the business brokerage community is notorious for NOT cooperating. They want to control both the buyer and the seller so they do not have to share the commission-in other words it is in their best interest, not the seller’s best interest. Imagine if you were selling your house and your broker said that they did not cooperate with other brokers. You would move on to the next person because your house would not get the same exposure to buyers that it does with a cooperating broker. It is worse in a business sale environment. You rule out all of the buyers working with other business brokers. I have had many experiences where I had a buyer interested in someone else’s listing only to be told that the client would have to go to them directly. I always tell the client to go ahead if that is what they want to do, but I have never had someone take me up on it. So, lost opportunity for the seller.
Remember what we discussed in Part I [In case you haven’t read it yet, here is the link.] — in any transaction, I want someone representing me in the negotiations and due diligence. As a buyer, the seller is paying the same commission and I do not pay my representation. As a seller, I am paying the broker to sell the business. Having him represent both sides to me makes no sense.
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About Camm Morton – Camm Morton, Owner/Principal with VR Business Brokers has a 30-plus year history spearheading complex office, industrial, retail, land and investment ventures throughout the country. He has established an exceptional record of noteworthy accomplishments including bold mixed-use projects, Traditional Neighborhood Developments (TNDs) and the high-profile and successful renovation of the historic Hilton Baton Rouge Capitol Center in downtown Baton Rouge. Camm has also owned and successfully developed real estate in 29 other states and Puerto Rico, including his own company and a billion dollar NYSE-traded REIT (Real Estate Investment Trust). If you would like to contact Camm, you can call him at 225.663.5999 or email him at firstname.lastname@example.org. Follow his blog for information on business sales, mergers and acquisitions and exit planning.