You’ve worked hard to build a business you feel proud of, so when it comes to selling it, ensuring you get the best deal is important. Business transactions of this size need to be handled with care, and without a business broker, the process may seem confusing and daunting. That’s why you’ll need to consider hiring a business broker to help with the sale. They usually have the right connections to get you better offers on your business and can ensure the process runs smoothly.
Choosing the right business broker is an incredibly important part of this process. We’ll dive into the different types of business brokers and share a step-by-step guide to help you choose the best one for your sale.
Understand the different types of business brokers
A business broker stands as a middleman between the buyer and the seller. When you’re looking to sell your business, they’ll act as the intermediary between you and potential buyers for the company. They solve a problem you have for a specified rate — and this problem is often related to the tedious processes involved in selling your business.
With this said, it’s important to understand that not all brokers are the same. This is why we will start by defining the main types of business brokers. These include full-service, discount, and online brokers — knowing the difference between them can save you worries, time, and money.
Discount brokers are not often found in terms of business brokerages. They generally specialize in buying and selling and will usually charge a low commission rate on any transactions.
In the business world, full-service and online brokers are the most common. Online brokers are relatively new and have only been making trends in recent years. Unlike traditional brokerages, these brokers focus on completing the entire process of selling your business on the internet. There are many advantages that they can offer, such as faster turnaround times and being available on demand. Furthermore, since they generally do not have to pay rent for multiple branches, online brokerages also usually charge much lower commissions than full-service in-person brokers.
However, some people still wish to sit face-to-face with a broker and discuss their options. If this sounds more like what you desire, then a full-service broker in your local area might be the better choice.
Once you understand what type of broker you want to use for the business transaction, things will be easier as you start to follow the right steps to pick a specific brokerage to work with.
Determine your needs
Knowing what you want throughout the transaction process is crucial and something you should establish even before thinking about which broker you want to use. Thus, step one is to determine and define the needs you have.
You’re selling your business — that’s the most basic need that you will add to your list. In addition to this, you should also understand what you expect from the process.
Here are a couple of things to consider when establishing your needs:
- Will you sell your brand along with the business?
- Do you want to sell all of the stock in the business in the transaction?
- Do you own or rent the property?
- Does your business have any licenses that need to be carried over to a new owner?
- Do you want the business to retain any staff members it currently has?
- How much are you looking to get for your business?
By answering these questions, you’ll have a clearer view of your expectations. The data will also be very useful later when you submit your documentation and requirements to the business broker. The more details they have to work with, the easier the process will be.
You’ll also need to discuss many of these factors with the broker. For example, some business owners might want to sell their company but want to ensure the staff members who have been working for them over the years will continue to have a job. In this case, the business broker will need to take note of this request when setting up contracts between you and the buyer.
Research potential brokers
The next step is to do some research. There are many business brokers that you can turn to — and since the market feels a bit saturated, it’s difficult to pick one among them all. With some initial research from your side, it’s possible to shortlist a few business brokers who might be worthy of your business.
There are a couple of ways you can do your research. Things can get a bit complicated when looking at online brokers, as you might be concerned about their trustworthiness, but there are ways to verify the credentials of these brokers too.
When you assess the different brokers that are available, take a few things into consideration:
- Start by assessing their website. In the modern day, having an online presence is crucial — not only for online brokers but also for full-service brokerages that have physical offices. Their website should be professional and convey the right message.
- Google the name of the brokerage and see if you can find a Google Business profile for them. This is a great opportunity to learn about other people who have used the brokerage and their experience with the brokers. If you’re able to find a Google Business profile, look through the reviews that were left on the page. This should already give you a better idea about what you should expect if you decide to do business with the brokerage.
- Take advantage of other online platforms to find out more about the company. This includes Facebook and Trustpilot, for example. The more testimonials from real customers you can get, the easier it will be to paint a picture of their authority, skills, and expertise.
- If you’re looking to work with a local brokerage, ask other businesses if they’ve worked with them before. This can also help you get more insight from locals about the services that each of these brokerages offers. Ask for recommendations from people who have sold their businesses recently.
Once you have a shortlist of potential business brokers, then you can move on to the next step.
Consider your budget
Your budget is important — a business brokerage is not going to offer you their services for free. You’ll need to pay them a fee to serve as the intermediary between you and a buyer. With this in mind, it’s important to note that not all business brokers work on the same type of fee schedule.
In some cases, you can agree on a commission fee if the broker is able to successfully get a buyer and sell your business. This commission will usually be a percentage of the total amount they are able to sell the business for. It’s important to specify how much commission you are willing to offer a broker beforehand. This can help to ensure you do not run a loss if the broker charges a more significant commission fee than what you expected.
When the broker charges a set fee or bills you per hour for the work they do, make sure you determine how much you can afford. You should consider how long the process might take if they charge by the hour, as this can also give you a good idea of the bill you’ll need to pay.
Ask questions
You want to sell the business that you’ve spent a long time in — so you want to make sure the broker that works with the transaction knows what they are doing. So don’t be afraid to ask questions. If you don’t ask questions, it’s going to be harder to decide on which broker to use later on.
Start by asking the brokerage to give you an overview of their experience and how long they have been in business. They might even be able to provide you with case studies where you can see what they did for other clients. The brokerage is usually going to assign a specific business broker that’s part of their team to your project. Sit down with the broker who they might assign to you and ask them questions too.
Some of the questions that you should consider asking:
- How long have you been a business broker?
- Are you experienced in any other fields of brokerage? If so, which ones, and for how long?
- Do you currently solely focus on business brokerage, or do you take on other projects too?
- Have you worked with a client in my industry in the past? Can you provide more details if so?
- What qualifications and certifications do you currently hold?
- How often do you get more for a business than the client initially wanted?
- Tell me more about the last sale you’ve made. There’s no need to mention names — just an overview of how it went down and what you were able to achieve.
It’s also a good idea to have every broker on your shortlist do a valuation of your business. Make sure you have all of the documentation you’ll need in place. This way, you won’t have to send more documents later on — which can cause a delay in the process. You’ll be able to get a better idea of who you’ll be working with when they answer these questions and perform a professional business valuation for you.
Be sure to also ask about how they rate their services and whether they will take a commission from the sale.
Make your decision
By now, you should have detailed information about every broker that made it to your shortlist. It is now time to sit at your desk and do a thorough analysis of all the data you have gathered in the previous steps.
Look at the answers that each broker gave you and assess the way they did the valuation. Make sure you carefully look at the cost of the service from each brokerage and consider whether they have fixed fees or a commission rate.
This is not a decision that you should take lightly. While you analyze the data you were able to obtain, take a closer look at the question about the last sale each broker made. If they are confident in their work, they should be willing to give you at least an idea of how they work with clients and what they have been able to achieve. Also, don’t forget to consider the qualifications they hold. The broker should be licensed to work in the state you are in and needs adequate knowledge to effectively negotiate offers for your business.
Connections are another thing that you’ll need to keep in mind. This one can be tough, as a business broker won’t tell you what connections they have in their network. You can consider who they have worked with in the past and for how long they have been in the business brokerage market. The longer they have been successful, the more connections they have generated. You want to opt for a business broker that is able to use their network in order to find suitable buyers that can make great offers on your business.
Conclusion
A business broker can be an incredibly valuable asset during a sale. They help you draft contracts and connect you to the right people so that you can get offers for your business. Brokers are not only great for selling your business, but you can also utilize them when you are interested in buying. Follow the steps we shared in this post to help you better understand how to choose a business broker for your next sale.