What You Should Know about Business Brokers
You have devoted time, money and energy to build and run your business. It might even represent your life's work. If you have decided that now is the right time to sell, you may consider hiring a professional business intermediary (sometimes referred to as a business broker).
When selling your business you want the very best professional guidance. Qualified business intermediary’s are trained and experienced in areas that are unfamiliar to most CPAs and attorneys. Working with an intermediary can make the difference between just selling your business---or selling it for the very best price and terms.
What can a Professional Business Intermediary do?
It is important to understand what professional business intermediaries can do and can’t do.
A Business Intermediary can:
• Help you price your business
• Provide current market conditions in your industry
• Maintain confidentiality surrounding the sale
• Confidentially find the right buyer
• Work with the buyer and seller to negotiate the deal
• Work with your CPA and attorney to structure sale
• Coordinate the deal every step of the way
(this is important because more than 50% of all accepted offers don’t make it to the closing table)
A Professional Business Intermediary is not
• A magician who can sell an overpriced business
• An attorney who handles the legal documentation
• An accountant/tax consultant
• A guarantor of value,guaranteeing a sale for XX
Who is a qualified Professional Business Intermediary?
There are many individuals out there calling themselves professional business intermediaries or business brokers. But before you hire one, check out their qualifications just as you would a CPA or attorney. Ask about their professional memberships, certifications, continuing education requirements and years of experience as an intermediary/broker.
Qualifications may include:
• Member of the International Business Brokers Association (IBBA). The IBBA certifies business intermediaries/brokers though stringent testing. They also require extensive Professional Continuing Education to maintain the credential Certified Business Intermediary (CBI)
• Member of State Business Broker Associations
• Member of the Mergers and Acquisitions Source (M&A Source)
• Have earned a credential in Business Brokerage (CBI for example)
• Have had experience in selling a number of businesses.
• Earn continuing educational credit each year
What do business brokers charge?
Generally a professional business intermediary/broker will charge a higher commission percentage than realtors charge for selling homes or commercial real estate. That’s because selling a business requires many more steps than selling a home or rental property; it is much more time consuming.
Also there is a different skill set required to sell a business; the business owner is adversely affected by letting the whole world (competitors, customers, employees, etc.) know that the business is for sale! Keeping the sale confidential demands special skills and experience not practiced in the sale of residential or commercial real estate.
There is no set fee schedule in the business brokerage profession. Some business intermediaries charge a fee up front, plus a commission (percentage of the sales price). Sometimes a portion of the upfront fee is refunded upon the successful sale of the business. Other brokers don’t charge any upfront fees. Some business brokers charge 12% of the sales price up to a particular level, and then reduce the percentage in increments of sales price. Other brokers charge a flat 10%, and yet others use the Lehman formula (a sliding scale; as the sale price goes up, the commission percentage decreases in increments).
What information will a business broker need?
An experienced business intermediary will request copies of three to five years business tax returns. They may also ask for the business financial statements, copies of depreciation schedules, copies of leases, con