Some Resources For Finding a Business Broker

Before we talk about resources for finding a business broker, let us first understand who is a business broker. Business broker resembles very much to the real estate agent. The job of the business broker is to bridge the gap between the buyer of the business and the seller of the business. If you wisely choose the right business broker, you can save a lot of money in the business transactions taking place through him. Here are some resources for finding a business broker for you.

Ask the People Whom You Already Know For Referrals:
Whenever we look for something that is new to us and we are not familiar with it, we try to gather information from the people we already know, and have faith in them that they would not misguide us. Same procedure we can apply when we look for the resources for finding a business broker. Take the advice of your business associates, accountants, lawyer and other associations of the industry to get the names of business brokers. If a reliable person gives the reference of any business broker then there is no harm in considering him for hiring his services.

IBBA:
Another very good resource for finding a business broker is the International Business Brokers Association or IBBA. This is an institute of business brokers working on non-profit basis. There are approximately one thousand three hundred members of this association.

Go Through the Advertisements in Newspapers:
One very good resource for finding a business broker is newspaper. Look for the advertisements under the business opportunities. You should check local, regional and national all types of newspapers for this purpose. You will observe several businesses for sell in these advertisements. Although, these advertisements are intended to attract prospective buyers yet you can check them to find out the names of the people who are managing these deals.

Yellow Pages:
Another resource for finding a business broker is to look in the yellow pages. However, do not get confused with the real estate agents and look specifically for the brokers who have experience in the selling of businesses. Any broker who just lists the name of your business on the multiple listing services is of no use to you. These kinds of brokers do not give required time to make such business deals.

Sign an Agreement After You Have Selected the Business Broker:
After your search for finding a business broker ends and you succeed in finding the right business broker, sign an agreement with him. State clearly in the agreement that what type of marketing strategy the business broker will adopt to sell your business. Do not forget to mention that any such advertisement must not carry the name of your business.

Business Brokers: Who They Are And What They Do

Since business brokers operate under the radar, many people don’t know who they are and what they do. If you are curious to know, business brokers are intermediaries who work with both buyers and sellers in order to facilitate the sale of small and medium size privately owned businesses.

For you to be a business broker you need to have the right level of education. For example, you must have a business background. You must also have attained business brokerage training from a recognized professional body such as the American Business Brokers Association.

Functions of business brokers

The brokers perform many duties such as:

  • Valuing a business
  • Marketing a business that needs to be sold. While they advertise the business, they maintain strict confidentiality. For example, they don’t mention the exact business that is being sold. They also don’t mention the owner of the business.
  • They introduce prospective buyers to the business
  • Facilitate meetings between buyers and sellers
  • Handle negotiations between the buyer and the seller after an offer has been made
  • Schedule and facilitate the closing of a transaction
  • Draft a confidential business review. The document is very important and is provided to prospects after they have signed a confidentiality agreement.

How brokers work

The professionals usually work with commissions. This means that they get a commission after selling a business. In most of the cases, the commission ranges from 8 to 12%. Most of the brokers charge a 10% commission; however, when the business being sold is small, the commission is usually higher.

How to work with a business broker

The first thing you need to do is to ensure that you hire the right broker. This calls for you to do a lot of research in order to identify a reputable one. Some of the things that you should look for when hiring include: experience, professionalism and specialization.

Once you have found the right professional you should give him/her all the details that he/she needs to work. For example, if you are interested in buying a business, you should give the broker a list of all the types of businesses that you are interested in. You should also mention the amount of money that you are ready to invest.

Conclusion

From the above information, it’s evident that business brokers have a role to play in the buying and selling of businesses. To ensure that you are on the same page with the broker, you should regularly communicate with him/her.

My Business Broker, My Banker

When you buy a business (or a franchise) the seller traditionally are willing to pay a finder fee or commission. Brokers will charge anywhere from 5-20% of the purchase price for listing the business. Franchisors will pay referral fees depending on what the total price of the franchise is. How can that be of benefit to you when you are buying your business?

During tough credit times most brokers are willing to carry back some portion of the commission to help the buyer and the seller complete the transaction. Some business brokers live and die by the idea that they will absolutely never carry back a commission, consequently they can and will kill the business purchase. When using these techniques remember that business brokers are professionals and they need to make a living to. These techniques are not to pull the wool over their eyes, they’re merely present to help you negotiate better.

Here are a few steps to get your business broker or franchise consultant to help finance your acquisition.

1. Listen to the first piece of information the business broker wants to know – Several brokers will start off their relationship with a buyer by initially asking, “How much cash can you put down IMMEDIATELY on this business if you were going to buy it?” This is the business brokers’ way of playing poker. Remember the object (the true object) of poker is to get the other party to show the maximum risk they are willing to accept. If you tell the business broker that you have $100,000 then they will try to get you to put even more down.

2. Ask the broker how business is going – This is the thermostat to knowing whether or not the broker is willing to play ball or not. A broker whose business is thriving may not worry about lending a qualified borrower a small amount of money to finish the acquisition. On the other hand a starving broker may be more than willing to lend money to get some portion of the commission.

3. Avoid engaging in a contract directly with the broker – Traditionally the business broker has engaged the seller for a listing. A business buyer can engage a broker to help them buy a business; however in many states brokers do not split commissions. Consequently a contract with the broker with the buyer may lead to a very odd relationship.

4. Ask the seller how much of a commission they are paying the broker – Here is your opportunity to play poke. Most business sellers feel like they are getting nailed to the wall when they are selling the business. They are giving up 5-20% of the business to some guy or gal that the seller considers to be a glorified real estate agent! What did they do in the past 20 years to earn this huge portion of the seller’s retirement fund? I find getting to see the listing agreement is one of the easiest parts of negotiations.

5. Ask the broker where to come up with the remainder of the money – The broker will try to get you to put more cash on the table. The greater the cash you commit to buying the business the more likely you are to close, and be successful with your new venture (according to the business broker.) When and if there is a “boot” or remaining funds that you need to come up with ask the business broker – frankly where to find it at. They may direct you to some lending sources, but a good broker may consider doing a carry back with the seller to accommodate the transaction.