Working with a Business Broker

According to The Business Brokerage Newsletter, there are approximately 3,000 - 3,500 Business Brokers in the U.S.A. Compare this to the almost one million Real Estate Agents nationwide. Real Estate sales are standardized with routine appraisals and a central Mutiple-Listing marketing service. More importantly, real estate has a liquid and fluid system of financing. Business sales, on the other hand, have inconsistent appraisal services, no single multi-list marketing service, and little institutional financing available to them.

Here are some things to consider before you establish a relationship with a Business Broker:

• Brokers will require a Listing Contract that obligates you to pay a commission if the business is sold
  • The term of the Listing Contract is usually one year; six months at minimum
  • The commission that is specified in the Contract is usually 10% on sales less than one million dollars
    
  • Advance payments against commission are usually required to compensate the Broker for time and advertising expen
• The quality of business brokers varies widely. Unfortunately, you will not know if you are dealing with a good one until some time has passed
• Although the Broker will guide you through the Preparation phase, you will be doing all of the work.
• Many Brokers use independent business valuation services. Most Buyers and Sellers will consider a business valuation that is prepared by a Broker to be self-serving.
• A good Broker will act as an intermediary in the sales process and qualify Buyers before you meet them.
• When a Buyer and Seller reach an impasse an experienced Business Broker should be able to offer alternatives to a deal structure other than reducing the price.
• Good Business Brokers will not compromise their fees.

(Working with a Business Broker)
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