Did you know that, according to the U.S. Small Business Administration, there are over 30 million small businesses in the U.S.? This means that over 99% of businesses in the U.S. are small businesses.
Whether you run a small business or a larger one, when you find yourself in a position where you’re looking to sell your business, it can be difficult to go through this process.
If you don’t have many unsolicited sales offers or you’re in an industry that isn’t booming, you might not know how to sell your business.
Fortunately, with the best business broker, you’ll get all the help you need when it comes to selling your business. But how do you find the right business broker for you?
In this article, we’ll review the 8 essential qualities you need to look for when hiring a business broker. That way, you can find a broker who’s the best fit for your business and your industry.
Finally, you can sell your business and move onto other entrepreneurial ventures. Read on to learn more.
1. They Work With Businesses Like Yours
One of the most important tips for choosing a business broker is that you look for someone who works with businesses like yours. If you find a business broker who has a lot of good reviews, but he doesn’t know much about your business type, can he really help you?
The Right Industry
When it comes to how to choose a business broker, you need to make sure they have experience within your industry. To get started, ask others in your industry about business brokers they’ve worked with.
For example, let’s say you run a home improvement business. You should speak with your lawyer, accountant, industry peers, and any associations in your industry about business brokers they recommend.
Many of these people will have worked with business brokers in the past and will be able to put you in touch with someone who has served home improvement businesses before.
When interviewing potential business brokers, ask them for how many years they’ve worked in your industry and how many of your industry businesses they’ve served.
The Right Size
If you’ve found the top business broker but they’ve only served large businesses and yours is a small one, they won’t be able to help you. They need to have worked with landing sales of smaller businesses, and they need to know buyers interested in small businesses, too.
The Right Location
It’s also important the business broker you select works in your area. This is especially important if the business you own serves people in your area (instead of an e-commerce company that has customers worldwide).
If you run a company in South Florida, you need a broker who’s based in South Florida.
When in Doubt, Use the IBBA
A great resource when you’re looking for a broker that works for businesses like yours is the International Business Brokers Association (IBBA). This is a nonprofit association that offers training, network, and education about business brokers.
They can help you find a broker that works in your industry, with businesses your size, and in your area. They work with over 1,000 business brokers, so you can use this resource when putting together your list.
2. They Have the Right Accreditations and Experience
The best business brokers have the right accreditations and experience. The most important of these accreditations are the M&A (Mergers and Acquisitions) Source Accreditation and the IBBA Accreditation.
The M&A Source Accreditation
The accreditation that a business broker can receive through the M&A Source is the M&AMI, or Mergers and Acquisitions Master Intermediary. There are several requirements the broker needs to meet in order to qualify. These include:
- Having over three years of full-time experience the last ten years
- Having the right education
- Having been a leader seller on at least three sales worth over $1 million
As you can see, this accreditation demonstrates that your broker would have all the right experience and education needed in order to be a reliable broker for selling your business to someone else in your industry.
THE IBBA Accreditation
The IBBA accreditation brokers receive is the CBI or Certified Business Intermediary. To achieve this certification, a broker must be able to demonstrate with evidence that they were a lead broker on at least three transactions.
They must also pass the Certified Business Intermediary exam after they have completed 16 electives credit hours and 52 required course hours.
To learn more about the requirements for this accreditation, check out this information from the IBBA.
The Right Experience
While it’s important that your broker have accreditations, experience is just as important. Accreditations are the bare minimum; on top of this, your broker should have extensive experience, because they’ll know exactly how to handle your sale.
3. They Have a Good Reputation
Even if a business broker has all the right certifications and years of experience, one of the best ways you’ll know if they’re good at their job is that they have a good reputation. To do this, you’ll have to do some online research.
What To Look For
When researching your business broker, take a look at what the Better Business Bureau has to say about them. Look for past complaints or lawsuits, too. You’ll want to look at their background, as well as credentials and experience.
Read Through Reviews
Many brokers in your area will be on websites such as Google Maps and Yelp. Take a look at reviews from clients, and be wary of fake reviews. Many business brokers will also have reviews on their websites.
They Can Provide You with Good References
One of the best types of reviews you can look at when researching business brokers is references from their clients. When speaking with potential business brokers, ask them if they can provide you with good references.
If they can’t provide you with good references, this a red flag. After all, if they have years of experience, they should be able to demonstrate that it’s a high-quality experience.
4. They Work Full-Time as a Business Broker
When you’re looking for a business broker, you might come across some brokers who work part-time. However, because they work part-time, they have less experience than someone who works full-time. This means you won’t make as much money in your sale.
A full-time business broker will understand business valuation much better, and they will also have a larger network of contacts. More contacts mean more potential sales.
If you own a larger company, then you might want to think about hiring someone who is a full-time merger and acquisition intermediary.
However, keep in mind that the fees a full-time business broker charges shouldn’t be extremely high.
Like part-time business brokers, a full-time one will only charge you between 10% to 15% on commission of what they sell your company for.
If they ask you for more than this, this a red flag. First of all, it isn’t industry standard. Second of all, they won’t have as much incentive to sell your company at a higher price.
5. They Have a Marketing Plan
If your business broker is serious about selling your business, they need to have a marketing plan. The stronger the marketing plan, the higher the offers you’ll get are. Some business brokers simply phone it in and place an ad online.
You don’t want this. To make sure the business broker has a strong marketing plan, the best thing to do is to ask detailed questions about the plan.
What They Should Offer
Ask them what they’ll do for your business, such as creating a professional marketing video, creating a detailed write-up of your business, and creating a blind profile. You should also ask how they reach out to industry contacts, and how often they do this.
The business broker should also be able to give you an idea of their advertising budget and how they will implement their sales strategy both offline and online.
On the buyer side, your broker should have a good screening process when it comes to how they narrow down potential buyers, finding the best serious prospects for the sale of your business.
Otherwise, you could waste a lot of time meeting with buyers who are unqualified.
The Importance of Confidentiality
Of course, one of the most important features of a marketing plan, when you’re selling your business, is confidentiality. You should speak with the potential business broker about how they balance keeping the sale under wraps while getting industry interest.
When looking at client reviews, it can also help to look for details on how the broker has done this in the past.
6. They Are Professional
Some business brokers will make you feel like you need to hire them immediately. That, if you don’t, you could be missing out on some big sales opportunities. However, this is a red flag. If you feel that the business broker is putting pressure on you, they’re being unprofessional.
You want to work with a business broker who is professional. When you’re speaking to them about selling your business, they listen to what you’re saying and understand what your needs are.
If you’re unsure about anything, the broker is more than happy to answer your questions. This can help, since selling your company is a complex process, both professionally and personally. It’s important to clarify any of your uncertainties.
A good broker is someone who’s easy to work with, and who will do several things when you’re working with them.
First of all, they’ll review the strengths and weaknesses of your company with you. Then they’ll review your reasons and goals for selling.
Finally, they’ll create a marketing strategy that meets all of your needs.
7. They Don’t Charge Hidden Fees
Another red flag to watch out for, in addition to high upfront fees, are hidden fees. If the business broker your speaking to has any of these, then it’s best to move on and interview other business brokers in your area.
8. You Trust Them
In addition to being professional, you need to feel in your gut that this business broker is someone worth working with. If anything feels off and you don’t feel like you can trust them, then something probably is. Even if they meet all the qualities on this list, this is a red flag.
Instead of wasting your time with someone who makes you feel uncomfortable, move on and go with another broker instead.
At this point, you should have a pretty long list of potential business brokers and won’t be losing much if you decide not to go with someone you don’t trust.
Need Help Finding the Best Business Broker?
Now that we’ve reviewed the 8 essential qualities to look for in the best business broker, you still might need some help finding the best business broker. After all, it can take a lot of time and effort to do all this research on your own.
Fortunately, at Dolan Sales Inc., we can help you. We’re experts when it comes to business brokers. We also offer business brokerage services for businesses based in South Florida.
To learn more about how we can help you, contact us now.