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How To Identify A Good Business Broker

Shawn Davis Buy A Business, Sell A Business

 

So you’ve decided you need a business broker to help you sell your business. But now you are wondering how to identify a good business broker for the job, considering there are hundreds of options available.

The selection process can be overwhelming – especially if you are doing it for the first time. Every broker poses as an expert in the field and promises to deliver the best services. However, the reality is that not all of them are created equally. Some are better than others. And since it’s your investment at stake, the last thing you want is to end up in the wrong hands.

Finding the right broker might take a little input from your part. But at the end of the day, the effort is usually well worth it. A good business broker will do so much more than to sell a business. He or she will:

  • Facilitate the sales process
  • Determine the most profitable selling price
  • Develop marketing materials to bring the business to market
  • Prepare documents (including legal ones)
  • Line up financing
  • Identify and vet prospective buyers
  • Negotiate the buy or sell terms and conditions
  • Interact with accountants, lawyers, and other advisors involved in the process
  • Offer advice
  • Manage the sale from end to end

A bad one, on the other hand, will only add more stress to the process. This is because he or she is only interested in what they are getting out of the deal. A bad broker won’t understand the business or have a clear plan to market or sell your business. He or she won’t offer a detailed business valuation but will insist on upfront fees. In most cases, the broker will only tell you what you want to hear – like a guarantee that you’ll get a certain sales price for your business or that you’ll sell in a matter of days – as opposed to setting realistic expectations.

 

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A good business brokerage firm will set reasonable expectations and deliver on promises.

 

That’s why the importance of telling a good business broker apart from a bad one can never be overemphasized. This article will tell you how to identify a good business broker to help you find the right fit for your personal and budgetary preferences.

How to identify a good business broker with specialized experience

There are hundreds of brokers in the market – but the easiest way to differentiate them is by looking at their areas of specialization. Most brokers are generalists, meaning they can handle just about any deal that involves money. You want to avoid generalists at all costs. Go with an experienced business broker who focuses mainly on the type of work you are interested in. For instance, if you are into real estate, the broker should specialize in selling real estate businesses – whether it’s a realtor website or housing agency, etc. He or she should also have experience selling businesses in your area and within your price range.

Each industry has its requirements, culture, and knowledge base. A broker who says that they can sell any business in any industry is not the right fit. Even the best broker may still have a hard time selling your company because they lack industry experience.

They should have broker background and credentials

In addition to specialization, you want to ensure that the broker has a proven resume. The easiest way to do so is by using the International Business Brokers Association (IBBA). IBBA is a nonprofit trade association that provides education, professional training, networking through conferences, etc. It is a great resource for identifying business brokerage experts near you. A broker who has obtained IBBA’s Certified Business intermediary (CBI) certification meets the organization’s high educational requirements and ethical standards. In addition to IBBA membership, other things to watch out for include the firms:

  • Name and physical address – if you can find them on state searches
  • About us page – and if it has information about their team/management, LinkedIn profiles, and other forms of social proof
  • Sold pages, and whether their claims correlate with available evidence

A good business broker should have a good reputation

Reputation speaks a lot about a business broker. It tells you whether or not they live up to their word. A good broker from a reputable brokerage firm will have an appealing track record of delivering on their promises. So, perform due diligence to establish what your prospective broker is known for. Check out their social media pages and testimonials to read comments from their previous clients. You can also read third-party review sites for expert opinions and recommendations.

 

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Industry experience is a crucial trait for an effective business broker.

 

They should have manageable listings

Find out the number of businesses for sale the broker has. A lack of listing is a good sign that they’re not famous. A large number of listings, on the other hand, may indicate that the business broker takes any job that comes their way. Your ideal broker should have around three to seven listings at any given time.

They should be well connected

A good broker has connections with buyers and sellers in the market. However, you should be careful not to fall victim to those who claim to have tens of thousands of qualified buyers. It’s better to work with a business broker with a smaller dedicated buyer network than one with a generic mailing list. When it comes to business opportunities, quality is better than quantity.

They should know how to value your business

There is no one-size-fits-all approach when it comes to business valuation. But a good business broker will use their experience, knowledge, and skills to find the best possible price. Be wary of a broker who gives a generic, “two times the annual sales” vibes and so on. A good business broker will use multiple seller discretional earnings (SDE) to value small business and Earnings Before Interests, Taxes, Depreciation, and Amortization (EBITDA) for a larger business. They will also consider other critical factors like location, assets, business quality, industry trends, and cyclical market forces.

They should value confidentiality

Most business owners don’t want people – including their competitors, customers, and staff – to learn about the potential sale. You probably feel the same way – which is why your potential broker should value confidentiality. The best ones in the game know how to create a buzz without exposing you. They only disclose information to qualified leads and still ensure that a non-disclosure agreement bounds them.

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Buying or selling a business can be a stressful endeavor. A good business broker will help you find the right buyer at the right price.

A really good broker should work full-time

Working remotely is all the rage these days, so you may get a good broker who works virtually. However, you may want to dig deeper to determine whether they are a one-man-army or doing the job part-time. Selling a business is a serious undertaking. That’s why you want to work with a professional firm that offers a quality working environment and a team committed to your work.

If you have been considering selling your business, you probably have wondered how to identify a good business broker to facilitate the sale of your business. The team at BuyOrSellBusiness.com has operated with the goal of providing a world-class experience for our customers and clients alike. Our team has decades of experience in the financial and legal services industries that are crucial for a business brokerage firm. Contact us today to schedule an appointment!

 

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