iDex7 - Small Business Brokers

Using Small Business Brokers to find a business

Using small business brokers to help you find the perfect business is one choice that could just pay large dividends.

Before you do however, you will probably have made decisions regarding the industry that you think would match your experience or skills.

Having a good idea of the type of business you want will help you when dealing with a small business broker.

Buying a Business – Help and Assistance

Business Brokers - Keep your Eyes on the Money

One way to utilise small business brokers would be to decide on the area where you would like to own a business.

And then use the business broker to find the perfect business within the geographical area of your choice.

You can of course hire small business brokers at any stage of the game, but before doing so it makes it a lot easier if you have at least some idea of the type of business that you are after.

So let’s talk about business brokers and when I would suggest it would be worth your while to consider hiring one.

Although simply keeping your ear to the ground and spreading the word that you are interested in buying a business can yield results, they may not be as relevant as those supplied by a broker, and you may waste valuable time.

When to Use a Business Broker?
  • If you have never started, bought or owned a business before, it can often be worth the cost to use a small business broker from the start. A good broker can be of great assistance and help prevent you making a serious buying mistake.
  • Where you want to buy into an industry that you are not familiar with, a business broker can be invaluable.
  • Sometimes, even where you have decided on the business and are now in the final stages of negotiations, it will often pay to hire a broker to help you finalize the purchase.
What can Small Business Brokers do for you?
Before moving on, it will probably be advisable to talk a bit about the costs of hiring a business broker.

It’s important to know that brokers are generally hired by business sellers to sell their business and are paid by the seller.

However, when you hire a broker to find a business for you to buy, he will charge you between 5% and 10% of the final purchase price.

This fee is variable, of course, depending on when you first get the broker involved in your purchase. The later in the deal, the lower the cost.

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There are brokers and there are brokers. A good small business broker will provide the following services …

  • A business broker is a person or firm that acts as an intermediary between sellers and buyers of small businesses.
  • Business brokers, also called business transfer agents, or intermediaries, assist buyers and sellers of privately held small business in the buying and selling process.
  • They typically estimate the value of the business
  • They advertise the business for sale with or without disclosing its identity
  • They handle the initial potential buyer interviews and discussions
  • They negotiation with prospective buyers
  • They facilitate the progress of the due diligence investigation and generally assist with the business sale

By talking to you, checking your business background, and making sure your interests and skills are fully understood, the broker will help find the best business for you.

Although you might have decided on the type of business that you want, experienced small business brokers would suggest other businesses in other industries that could be more suitable.

  • A small business broker will have many businesses on the books that have all been screened for value and price. This can help you make a better decision with your final choice.
  • Once you have made your choice, your broker comes into his own when negotiations begin. A good broker will be fully involved in the sales agreement and help keep everyone on the straight and narrow.
  • One further role of small business brokers is to ensure that all the necessary paperwork is completed and submitted. This will cover the relevant laws, regulations, licenses, permits and financing. Doing this properly can save you a lot of time and possibly money later.
When you decide to retain a business broker, settle the terms and the commission you will pay before you instruct them to start work on your behalf.

Negotiate the best deal you can get, usually a combination of upfront and commission fees. Don’t pay anything until you have had the chance to check out the broker. There are disreputable brokers around.

Now that we know what you should expect from a good business broker, let?s take a look at the kind of broker you will need.


What to look for in Small Business Brokers …

Business woman Demonstrating Business Brokers

You do not want a real-estate agent, but a specialist who helps when buying a business, so check them out first before deciding on the right one for you.

Interview a few brokers, don?t be shy and ask for references.

Check the Better Business Bureau for any complaints that might be lodged against them.

Lists of brokers can be found in the Yellow Pages, on the internet and advertised in business magazines and journals.

The International Business Brokers Association (IBBA), the worlds largest, has lists of accredited business brokers.

You should be looking for small business brokers who have sold and still sell businesses in line with your interests. Look out for the following qualities in the broker you wish to select.

Never be afraid to ask a business broker questions about themselves and their business.
  • Choose a broker with experience, 3 to 5 years, in the buying and selling of businesses. Experience and time are needed to become a good business broker. They must be competent in accounting, land, building and small business valuation, know the legal side of the business and be good salespeople. That is why most small business brokers are in their 40’s and 50’s. Ask about accreditation and trade association memberships
  • Do they only buy and sell businesses, if they also sell real estate move on. You need a specialist. Although most business brokers are licensed real estate agents, the good ones don’t sell real estate, they specialize in handling business sales
  • Select a licensed business broker whose license is current. Visit the brokers office, does it appear adequate? Have they a website, if not drop them. If they have check it out. Is it professional and is it relevant?
  • Do you feel happy putting your trust in the broker? Do you like them. Does it appear that they can find what you want within a reasonable timeframe
  • Check if the printed marketing materials for the business on sale are well written and do they contain meaningful and relevant information

Finally remember that you are in the market to buy a suitable business and any small business brokers you hire are there to help you succeed. Make sure they do. A good quality small business broker will do this for you without hype or promising you the earth.