Selling A Business With A Business Broker
1. Determine what expectations you desire from a business broker.. Make sure you discuss and convey those expectations to the business broker you select. Direct and open communications about expectations and other issues with your business broker is critical in selling your California business.
2. Ask all potential business brokers how they will be advertising and marketing your business for sale. Make sure they allocate not only enough time to service your listing but also the budget to get the best exposure through advertising and marketing efforts.
3. Have the business broker determine the adjusted net income and valuation of your business before you sign a listing agreement. Ask them about a cash price vs. a price with terms involved. 70% of all small businesses put on the market never sell and the number one reason is that the price is usually too high and the deal structure is unrealistic for potential business buyers. There are many ways to structure a deal - you need a business broker who can be honest with you and discuss what your business is realistically worth, and how to structure a deal that will benefit both you the owner and a potential buyer.
4. If the sale of your business is confidential - you need to know how the broker is going to keep the sale of your California small business confidential in nature. Make sure your broker or agent is using a professional Non-Disclosure Agreement or Confidentiality form for your protection, and keep all copies completed by qualified business buyers on file and available to you at all times and after the business is sold or listing agreement expires.
5. Make sure the business broker you select to sell your business has prepared your business for marketplace - are all the financials and tax returns on file and ready for possible due-diligence. Do you have all documents ready for review like your lease agreement, equipment leases, and contracts with vendors, etc? If the business broker doesn’t have all your material ready to go for a possible review by business buyers, the interested party may walk – be ready to go upfront with all your material for the sales process.
6. Make sure the business broker you select to sell your business has experience or knowledge with selling your type, location, and size of business if at all possible. Many times if the business broker has sold your type of business they will have a file full of potential buyers.
7. Returning phone calls in a timely manner is critical! Make sure the broker or agent you choose is good about getting back promptly to potential buyers. You would be surprised how many business brokers delay calling back buyers - remember the sale of your business is in “competition” with the sale of thousands of other California businesses - you want to make sure your business broker is responsive in getting back to potential buyers.
8. Time kills deals. Make sure the intermediary you select is responsive in getting things accomplished and moving things along. Deals tend to go south when parties aren’t moving forward on a deal at all times.
9. Constant and continuous communication with your broker is important - make sure you let your business broker know what your expectations are for letting you know how things are progressing (i.e. once a week updates, only call when something is going on etc. - its up to you, however we think it is important that at least weekly dialogues between seller and business broker is important so you can see how things are moving forward). Find out how many buyers have responded, and any feedback on all buyers who have expressed an interest in your business for sale.
10. Make sure you pick a business broker who spends the needed time on your business for sale. Some business brokers take on too many listings knowing that some may not sell - it’s a numbers game to them. You need someone who understands your business, what your expectations are, and who can properly get your business sold!
11. Businesses on average typically take six months to two years to sell. If your broker does his job correctly (and utilizes the TIIC Method of selling businesses) your business should easily sell within two to six months!
12. The listing agreement/contract should include: length of time they will be representing you (three to six months is typical), how they are going to advertise and market your business for sale (get the details and budget), how often they should be contacting you about buyers and deal updates (at least weekly), what happens when the agreement expires - with all the buyers who have signed confidentiality agreements during this period, what happens if you find a buyer – what is the commission then, will they cooperate with other business brokers/agents on your listing (this opens the market to more buyers), etc. – get it all in writing so you both know what the expectations are!
13. California business brokers and agents typically charge a commission between 8% to 12% of the actual selling price to sell a business. You get what you pay for so if you negotiate a lower commission make sure you aren't losing a lot of necessary and essential services because of the lower commission structure.
Business Brokers Can Make Buying A Business Much Smoother
California business buyers need to understand how business brokers and agents work on behalf of business buyers to fully realize their services and contributions. The tips below will highlight the best way to work with business brokers to find a California business to purchase.
1. Many business brokerage offices have multiple agents, make sure you interview many before deciding on which broker to work with. You should choose a business broker or agent who you are compatible with and has the time to work on your behalf to find and pursue listings for you.
2. Business brokers are going to ask you many questions, make sure you know the answers and are ready to give them the answers to: A. How much money do you have for down payment? B. How much money do you need in return, to live on, etc ? C. Where do you want the business to be located? If you don’t know the answers to these questions, you should - or many business brokers may not take your search seriously.
3. Make sure all business brokers you come in contact with have a copy of your: Buyer Profile, Personal Financial Statement, and Resume. Include all of these with all non-disclosures you fax, email back to business brokers when requesting more information on listings.
4. Finding and buying a business if your successful is hard work. The process of buying a business is analogous to finding the perfect job – you should expect the process to take anywhere from four months to a year. A good business broker should be able to find you the right business within four months.
5. Make sure you understand from business brokers who is representing whom. Is the business broker acting as a duel agent or on the behalf of you the buyer or the seller. Get this information in writing to make sure – it’s called a Representation agreement. Remember, all business brokers are different. Take the time to get to know the right ones to work with -