Buying or selling a business can be a stressful time. Choosing an adviser to help you through the critical steps in the process is key to a successful transaction. From research to close, it is important to understand what your business broker will do for you, know the costs associated with hiring a broker, and conduct a careful evaluation of their track record and success.
What Your Business Broker Will Do for You:
A broker is an individual who works as part of a business brokerage firm and is experienced in both business and business sales. Business brokers put buyers and sellers in touch with one another and act as a helpful mediator, promoting a productive discussion that ultimately benefits both parties.
Buyers:
If you are buying a business, a business broker will work with you from the very beginning to understand your interest in purchasing a business, educate you about the buying process, and prepare you to negotiate with buyers. The best business brokerage firms have access to a database of businesses for sale and are able to connect you with businesses that match your unique desires, interests, and purchasing abilities.
Sellers:
If you are interested in selling a business, a business brokerage firm will work with you throughout the selling process to assist you with the sale and maximize your business’s value. Working with a business broker will take some of the work of selling out of your hands, so that you can continue to run your business and make sure it remains profitable until the time of sale.
Initially, a quality business broker will meet with you to learn about your business and discuss your goals and reasons for selling. This discussion helps the broker to create a strategic marketing plan. Using various channels, a business brokerage firm will advertise your business, giving it maximum exposure to the most qualified buyers. Valuation of your business can be a tricky process, but a brokerage firm has experience in the business valuation process and can help you obtain an accurate valuation of your business while also finding ways to increase its value. Perhaps most importantly, a broker will ensure that the sale remains confidential, and they will screen buyers to make sure they are serious and qualified before sharing further information about your business. When it comes time for negotiation, a business broker will provide an objective approach to the deal.
Costs Associated With Hiring a Business Broker
Buyers:
Typically, the seller pays business brokerage firms. However, buyers may need to spend money on legal and accounting fees, along with other potential startup costs.
Sellers:
With an effective business broker, sellers will be able to begin the initial consulting process without any required payment. While there are often no upfront costs or fees for sellers, the business brokerage firm will receive a commission at the end of sale. While some business owners may choose to forgo a business broker in order to save the commission cost, it is important to keep in mind that a good business broker will expertly maximize your business’s value. With a qualified broker, you are also guaranteed to avoid costly mistakes in the selling process.
How to Evaluate a Business Brokerage Firm
Not all business brokerage firms offer the same level of quality. Whether you are buying or selling a business, you should choose an experienced business brokerage firm with a strong record of success. Before choosing a particular business brokerage firm, you should ask a few questions about the firm’s qualifications and experience. At the most basic level, a broker should have been trained either by an established brand program or through an association like the International Business Brokers Association. Consider the business brokerage firm’s experience, including how long the firm has been selling businesses and the experience level of their business brokers. You should also ask about the number of deals the business broker closes annually. Additionally, if a business broker has connections with attorneys, accountants, and the business community, it is a good sign that they are experienced and respected as a firm.
Lastly, business sellers should look into what the brokerage firm spends on advertising businesses. Make sure that they engage in strategic, multi-channel marketing. A truly exceptional business brokerage firm markets their clients’ businesses online, through their own site and other business-for-sale sites, and offline channels such as mail. Also being a part of a large network that has a buyer database CRM system that they can leverage can be crucial to finding the RIGHT buyer.
Buyers and sellers alike should keep these criteria in mind as they begin researching business brokerage firms. While some business brokerage firms will not meet these criteria, effective business brokerage firms like Transworld have the resources, experience, and dedication required to find you the perfect buying opportunity or produce the ideal selling outcome.
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