7 Tips For Selecting the Best Small Business Brokers to Sell Your Business

Are you thinking about selling your business? Have you ever gone through the process before? Are you confidant that you can do it yourself? Where would your time be better spent, running your business at peak performance while trying to sell it, or focused on the advertising campaign, networking, negotiating, and coordinating the closure of the sale of your business? Maybe you should consider doing what you do best, running the business, and search out small business brokers and let them do what they do best, sell businesses. If you go that route, here are 7 tips to choosing a business broker that makes sense for you.

1. Don’t get lost in the shuffle

You want your broker to have a proven record and a great reputation but you don’t want the organization to be so big that your deal is passed off to a junior staffer. You want the active involvement of the principals.

2. Do your due diligence

You’re about to engage the services of someone that is going to have a big impact on your financial life. Make sure you are comfortable with the relationship. Check with the International Business Brokers Association and see if your broker is a member in good standing. Follow up on the references provided and determine just how satisfied past clients are. Check with your local better business bureau and see if there are any unresolved complaints.

3. Use a specialist

Real estate agents and other professionals sometimes hold themselves out as business brokers on a part time basis. You want someone who makes their entire living selling businesses full time. Preferably somebody who has experience in your particular industry and someone who can point to successful sales they have made for your competitors.

4. Avoid heavy up front fee structures

Typically a business broker will charge between 10% and 15% of the sale price as a fee. While it is customary for them to ask for some up front fees to initiate the process, avoid those brokers who are looking for greater than a third. Also make sure that the up front fee is deductible from the sales fee when the business sells. Following this advice will save you from having to invest a ton of cash before you actually sell the business.

5. Only contract for the business selling services

Smaller business brokers will offer accounting and legal services that you will need during closing for an additional fee and these services are typically outsourced by the broker. It may be to your advantage to contract for those services directly leaving the broker with only the requirement to focus on the selling process and not generating add on fees.

6. Share your expectations

Before you select a broker you should have at least a general idea of what you want to accomplish by selling your business. You should have a rough valuation number and you should know if you want a cash sale or stock. Share this with the broker and see if he agrees with your plan. While there probably will be differences in valuation, your broker should be in tune with the rest of your objectives. If he’s reluctant or believes that it will be difficult to achieve your goals, find another broker.

7. Keep the whole process confidential

The last thing you want to do is let the word that you are seeking a business broker or that you are in negotiations with a buyer leak out. Once it becomes common knowledge that you are selling, your relationships with your employees, customers, vendors and bankers could be adversely affected. Have an exit plan for after the sale that includes sharing the news with all those listed above.

Using business brokers to help sell a business is usually the smart route to take for any business of substance. You want your organization to have as much “curb appeal” as possible during the process and that means you should be focusing your time on optimizing the business not chasing down buyers.

Selling a Small Business – Why Selling a Smaller Business is Different

If you are a business owner thinking of selling a small business, the process is somewhat different than selling a much larger, more involved company.

Smaller businesses are bought by investors for different reasons and, depending on the size of the company, attract completely different buyer profiles. This article looks at some of the differences in selling a small business from the owner’s point of view.

Micro-Businesses
What is meant by “micro businesses” are businesses that are valued at less than $100,000. There are many different types of micro-businesses and each can attract a different buyer profile. For instance, if you own a small, home-based business valued at $75,000 or so, this usually attracts a potential buyer that is completely different than the person looking for a business valued up to $250,000. To expand, businesses valued under $100,000 or so usually fall into a number of categories. They can be home-based businesses where a good buyer candidate can be a stay-at-home parent looking to augment an income. At this lower price range the business may also be a service based business such as landscaping or home inspection, as an example. This type of business is attractive to the “do it yourselfer” who is purely looking to ‘buy a job’ and a book of existing accounts. The $100,000 and under price range might also reflect a business that could be larger but has suffered a setback and has the potential for stronger earnings going forward, with right management in place. Micro businesses do not necessarily mean ‘micro earnings’. Many smaller companies have excellent income potential and could make a great investment for the right buyer. The point is, when you are selling a small business (especially a micro business) please don’t merely characterize the type of potential buyer based on price. Smaller businesses are attractive to many people for many different reasons.

Small businesses valued in the $300,000 price range
The price point of $300,000 is a ‘sweet spot’ for selling a business in that it is a price that is ‘doable’ by a relatively large pool of buyers. Businesses valued at approximately $300,000 (typically) earn an income to an owner/operator that is over $100,000. This size of business is attractive in that it allows an owner to operate it and pay off debt and earn a comfortable living off of the business income. That price range is within reach for many people, especially home owners who can finance a portion of the business purchase with home equity. If you own a small business in the $300,000 range and if your business is profitable, priced right, stable and showing consistent returns, there should be a relatively large pool of buyers for your business.

Small businesses valued up to $750,000
If you own a business valued in the neighbourhood of $750,000 this is still characterized as a “small business” but it would attract a completely different type of buyer (or investor) to your company. Selling a small business in this higher price range usually attracts a buyer with more financial resources or perhaps a partnership or group of buyers. Many times, the idea with buying a business at this price range is that it can earn enough income to justify hiring a manager with enough cashflow left over to pay the debt and earn a return for the buyers.

If you are thinking of selling a small business think about the type of buyer that would be ‘ideal’ to purchase your company. Think in terms of price and financial ability but also pay attention to things like aptitude and lifestyle choice. There are many small business resources on the internet to answer some of your questions. Talk to a business broker to help you sell a smaller business.

Is Going Direct Really Cheaper Than A Broker Or Price Comparison For Small Business Insurance?

The UK media is currently awash with advertising slogans from direct commercial insurance companies targeting small business owners in an attempt to make them switch their provider of business insurance.

‘Get 12 months cover for the price of ten’ and ‘You won’t find us on price comparison websites’ are typical of the slogans emanating from these companies, in a language more akin to the selling of car insurance than the traditional professional and almost stoic approach to the selling of business insurance cover.

In the current recession, price has become the determining factor in winning the war of market share for all goods and services and insurance is no exception. Prudent small businessmen and women are looking to cut costs in all areas of their business and the large direct insurance companies are well aware of this.

The large insurers are also aware that the UK market has over five million small businesses of which a fifth are sole traders, self-employed and people working from home, many of whom are familiar with purchasing their personal insurance direct with the provider, either by phone or on the Internet.

There are three types of provider in the current market for business insurance in the UK.

Intermediaries such as insurance brokers and agents, price comparison sites and direct commercial and business insurers.

Each has their own advantage and disadvantages, however whether one distribution channel is cheaper than another is often a subjective view from a particular trade, or dependent upon factors many of which cannot be quantified in price.

Direct Insurance companies claim to be able to offer cheaper polices because the cut out the costs of the middleman. It is certainly true that direct insurers do not have to pay an intermediary for the cost of the lead or introduction, however it is questionable whether this cost saving is actually reflected in the prices offered to the public.

Certainly there are economies of scale to be made by centralising the life-cycle of a policy from sales point to claim and renewal, however all those functions that are performed by an intermediary still have to be carried out in-house by the direct company and these have a cost.

Many large composite insurers often have distinct direct divisions with their own target market and premium rates. The same company may also have a broker or intermediary division or channel.

It is quite often the case that a large broker with a large book of business of, for example, small builders liability, will receive much more preferential rates then the same companies direct channel, because that insurance company wishes to retain that brokers clients.

Commercial Insurance brokers then are often able to offer preferential rates because they have more flexible schemes and arrangements than the direct channel.

One of the main benefits of using an insurance broker or intermediary in purchasing commercial insurance for small business, cannot be quantified in price and is worth the commission or fee that they may charge. That is advice, market and product information and knowledge, access to various markets such as Lloyds and some human help if the worst happens to a business and a claim is needed.

A commercial or business insurance broker is often able to negotiate far better claims settlements than if an individual were to deal direct with the insurer. The main reason for this is once again the insurer wishes to retain that brokers share of the total risk pool and will often pay out to a broker on an ex-gratia basis. This cost of this service is not quantifiable at the quote stage where small business cover may well just be valued for the price paid or the covers bought.

The third major way in which small business owners can purchase cover is by visiting a price comparison website. All the major UK comparison sites have recently begun to offer online cover aimed particularly at the small business sector, with under 50 employees. This is in direct competition with the direct insurers for television and media advertising space, aimed in particular at self-employed tradesmen and women who require business liability insurance and perhaps commercial van cover.

The comparison price proposition is that they can compare the market or at least a small section of it, to find the cheapest business insurance. They often do not provide any assistance in the purchasing decision-making process and the reality often is, that the cheapest commercial and small business insurance can be found in one of the other distribution channels.

It is therefore important that a small businessman shops around and takes some time to compare offerings including premiums, covers and services from all three sales channels. Prices tend to vary immensely by trade across the direct, broker and comparison markets and often it is a case of finding the provider or supplier who is the industry leader for a particular business type or trade in order to make large savings.

Business Broker Network

A business broker network is basically a group that has a number of independent business brokers or brokerage firms. These firms could be based in different countries. Such network groups offer a much wider range of business opportunities to their clients. The network groups are able to offer more businesses for sale or purchase. So if you want to buy, sell or start a new business, you could give one such network group a try.

There are several network groups in existence. Some of them specialize in creating business opportunities in certain geographical areas. But many of them are not region-specific, as their network has firms from various parts of the world.

The members of a business broker network readily share their databases with investors, corporate entities seeking mergers and acquisitions, and individuals who could be helpful in creating a business opportunity. The common access to this wide database helps you to meet the demand of your clients, not only at the local level but also at national and international levels.

The advantage of a business broker network is that one does not have to go to a large number of business brokerage firms. The brokers who are a part of this network are often known as affiliates. Many network groups keep on upgrading the technological and financial tools to ensure better co-ordination among its members. It also prepares various professional reports at regular intervals for the affiliates.

If you would like to be a part of one such network group, you can do so by visiting the local office of any of these groups, or by contacting them online. The association with a large and reputed group could give a major boost to your business, as you can expand your client base not only across the nation, but even across the globe.