Sell
Your Business Tips, Hints & Techniques:
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your name & e-mail address below and each week I'll send you
detailed tips, facts, resources & ideas you can use right
away to help sell your business faster and for more money.
Step
1 - Preparation
Business
Brokers - How
To Choose The Right One
The
vast majority of small businesses are sold without the assistance
of business brokers.
If you have been studying the information here at TheBizSeller.com
in any detail you have probably already decided to sell the
business yourself.
But
if you do decide the hire a broker, here are some suggestions
on how to pick the right one and how to structure the agreement
in your favor.
What
Business Is The Broker Actually In?
In
many states there is no training or certification needed
to become a business broker. In other states, brokers are required
to hold a real estate license.
In
these states it's common to find real estate agents that do
business brokering as a side business. If you deal with a broker
who is also a real estate agent, make sure that being a business
broker is more than just his hobby.
You
will pay a pretty penny for the broker's expertise and experience
- you should make sure they have that experience when
it comes to selling businesses and not just experience selling
houses.
Questions
To Ask
If
you hire a broker you will be working with them closely for
months to come; they will have access to your most confidential
business records; the amount of money you put in your pocket
at closing will be influenced heavily by the quality of work
they do.
Therefore,
you absolutely must check them out.
Here
are some questions you should ask any prospective broker before
hiring him:
1.
How long have you been a broker?
2. Have you ever owned a business?
3. How many businesses similar to mine have you helped
sell?
4. Can I see a blank version of your Listing Agreement?
5. What percentage of you income comes from brokering
and how much from real estate (If applicable)
Ask
them to provide you with references from previous clients. Then,
I suggest you do something very unusual: Actually call
the broker's references!
I
know a lot of people ask for references just to see how the
person will react when asked (and to see if they actuality have
any). But you can learn a lot about the broker's reliability
and professionalism by talking to people who dealt with that
broker when they were in the exact same spot you are in.
Business
Broker Fees
There
are two benefits a broker can provide the business
seller. First, he can locate potential buyers while maintaining
the seller's confidentiality. And second, a broker will
qualify these potential business buyers so the seller saves
time by not having to deal with weak prospects.
The
big negative of dealing with a business broker is his fee, which
averages 10-12% of the sale price. This fee is charged
to the seller.
There
is also a minimum fee. A very small business will pay
a flat amount, typically $8-$10,000, instead of the commission.
For a business worth $50,000 this minimum fee actually works
out to be a higher percentage than the 10-12% industry average.
But as a matter of practice, brokers usually won't be interested
in your business unless the asking price is above $100,000
These
fees are the reason most business owners choose to sell their
business themselves and rely on their lawyers and accountants
for the professional assistance they need.
The
Broker Agreement
If
you decide to use a broker you'll be asked to sign a broker
agreement which will detail the his fees. If possible, have
your agreement include the following clauses:
Timing
of Payments - Have it written into the agreement that the
broker's fee will be paid at the time you receive the purchase
price - not at the time the sale is closed. This way, if you
finance part of the sale price over a number of years, you pay
the business broker as you get the money, not all up front.
Length
Of Agreement - Your listing agreement should be for a limited
time. If the broker locates the buyer within that time he gets
paid. Be careful of lengthy agreements that lock you in with
one business broker for more than 6 months. If he doesn't produce,
you want to be able to try other options. A 6 month business
broker agreement is the longest you should allow. However, because
selling a business can be a lengthy process, 3 months is usually
too little time for the broker to find the right buyer. Try
to settle on something between 3 and 6 months. If after six
months, you haven't closed the deal but you think the broker
has done a good job, you're always free to extend the agreement.
But you want to be free to decide on an extension 6 months from
now, not today.
Broker's
Guarantee - Include a paragraph stating that if you find
the buyer, you don't have to pay the commission. Without this
clause, the broker is usually paid no matter who locates the
buyer. Before signing any listing agreement, it is best to have
your attorney review it to make sure your interests are protected.
Sell
Your Business Tips, Hints & Techniques:
Enter
your name & e-mail address below and each week I'll send
you detailed tips, facts, resources & ideas you can use
right away to help sell your business faster and for more money.
Next:
Step
2 - Business Valuation
