The total market size of business brokers across the US has reached a staggering $1.2billion as of 2021. With so many different players in the market, it can be incredibly challenging to ensure you’re going with the best business broker for your deal.
This is tough for those buying or selling businesses because finding the best business broker can be the ticket to a streamlined transaction. Without the right broker, your deal could take months, or even years, to finalize, and you could be losing out on money depending on which side of the deal you’re on.
That’s why we believe it’s vital that you know the tricks of the business broker trade. We’ve gone through these 6 key tips to finding the best business broker possible.
That way, you can focus on your new company’s future or your future without your old one.
What Does a Business Broker Do?
Before we go into the details of what makes a good business broker, you need to know why you need one in the first place.
Essentially, a business broker assists with the buying or selling of businesses. They can sometimes be referred to by other names, like business transfer agents or just intermediaries.
It’s their job to estimate business values, as well as advertise them for sale. They also handle more complex aspects of the buying process, such as interviewing potential buyers on behalf of the seller.
They have to do everything they can to aid with the buying and selling process of businesses. That means that if you don’t have the right broker, you could run into a huge array of problems.
They might mess up the valuation of your company, meaning you could lose out on thousands of dollars compared to what your business is actually worth.
Or, they could fail to complete the right due diligence on sales. This could mean you’re selling your business to a shady individual or enterprise, which could come back to bite you in the future.
Now that you know what exactly a business broker does let’s go into the 6 key things to look out for when choosing a business broker.
- The Best Business Broker is Experienced & Can Prove It
When you’re looking for any professional, you want them to be experienced at what they do. This would be the case if you were paying a plumber to fix your pipes or a garage to fix your tires.
A business broker is absolutely no different. It will help if you are looking for a business broker who’s experienced in what they do.
But finding proven experience can be harder than you think when it comes to business brokers.
Just because a broker has a flashy website or arrives at meetings in a fancy car doesn’t mean they are legitimately experienced. With business brokers, you need to look at a proven track record.
Any experienced business broker will have settled several notable sales during their time on the job. You need to ask upfront for these examples and look at them in detail.
Did they secure a good price for the seller compared with the worth of the business itself? How long did it take them to settle this deal?
Did they find the seller themselves through their networking, or did the buyer come to the broker?
These are the kinds of questions you need to be asking when looking for a business broker for your sale.
- Consider the Fee
It is common practice for a business broker to work on commission. That means that they agree to receive a portion of whatever sale they make for your business.
This is a desirable form of payment for both parties with many advantages. For you, it means you know that the broker is going to get the best deal possible to ensure their personal takings are larger.
The broker means they can estimate how much they think they can get for the brokering and aim higher.
You should avoid brokers looking to receive a significant amount of money from you upfront, for starters. This is not common practice and is a sure sign that someone isn’t giving you a fair deal for their services.
To make sure you’re working with a top business broker, you should also look at the commission percentage itself. Is this fair for the job?
Remember that the average brokers can typically expect is 10%. You should bear in mind those who want to negotiate higher or lower than this, though, and compare what they’re offering with the other points on this list.
- Working Specifically
This is perhaps the most important point about good business brokers as it ensures specificity to your business. The realities of the business world are that there are hundreds of different business types and sectors.
You want to find a business broker who knows your sector inside and out. Maybe they’ve already sold several different businesses that are similar to yours.
This is the perfect situation, as you know they know what they’re doing with sales of your business type. Some brokers will specifically market themselves to deals with certain businesses.
This can help prove that they know what they’re talking about within their sector.
Bear this specificity in mind and search for a broker accordingly. If you’re looking for healthcare business brokers, make sure you’re only going with brokers who have specific experience within the field.
- How Big Are They Talking?
When selling businesses, size absolutely matters. The bigger your business is, the more employees there are likely to be involved in the transaction and the more money involved in the sale overall.
That’s why it’s best to work with a business broker who is accustomed to making sales within your size bracket.
It’s no good hiring a broker who typically closes sales on businesses worth $1million if yours is worth $100million.
The more experience a broker has with businesses of your size, the more likely it is they’ll get you a good deal. It means they’re accustomed to the particular challenges that come with selling a business of your size.
It also means they can more accurately value your business and let you know how long a sale will likely take.
Make sure you’re comparing the sizes of sales they’ve previously closed with your own. This can give you the best indication of how well they’ll do selling your business.
- How Much Will They Actually Do?
As shown by our section above about what business brokers are, business brokership involves many different stages.
The reality is that some brokers will be more involved in the sales process than others. Some will happily conduct interviews on your behalf, whereas others may not be involved with this part of the process at all.
Some brokers are particularly good at finding buyers due to their extensive contacts. Going with one of these brokers could be advantageous compared with someone who doesn’t have the same pool of potential buyers to draw from.
Make sure you always check on an initial meeting exactly what the process of sale will involve. You need to know which stages they will manage and when they will hope to manage them.
Not only does this give you an approximate timescale, but it also shows you just how comprehensive a support plan your broker is offering. The more support they’re prepared to offer you, the more likely it is that they’ll make a killer sale.
- Hire Someone Who Works For You
Ultimately, a business broker is someone you’ll need to work closely with for several months.
You need to ensure you find a broker with who you’re comfortable working. This is a hard thing to pin down; it might be how responsive they are via email or just how charismatic they are in person.
This report between you and your broker is vital to helping you feel at ease during the process. It’s something that can’t be taught, but it can’t be ignored when looking at how to choose a business broker.
If you like them, chances are you’re going to work better together. That can make the whole process of selling feel better, as you won’t feel like you’re fighting with someone every step of the way.
If they tick this box alongside all of the above, then you’ve likely found the best broker for you.
Where Can I Find Out More?
If you follow these 6 steps, you’ll be able to find the best business broker for your business sale. But there’s more to business than just buying or selling.
If you want to find out more business management tips, make sure to take a look through some of the previous posts on our website. That way, you’ll build an even bigger business that’ll sell for even more money when you find the right broker.