Prospective business buyers often face a number of challenges when buying a business. You may want to consider hiring a business broker if you are having a difficult time with the process. Why would you choose to pay a broker instead of looking for a business all on your own?
Here are some of the benefits to working with a business broker:
- They know how to find a business that is relevant to your particular niche.
- They can help you secure financing.
- They are experts at valuing businesses and will make sure sellers don’t overcharge you.
- They will often make sure the business is sold at a discounted price to ensure they receive a commission.
While brokers can provide a valuable service, the quality of services can vary greatly. Do your diligent research to make sure you are hiring a business broker that is honest, competent and has a good track record.
Follow these guidelines before you commit to working with a broker:
- Get referrals from other buyers. A broker’s fees are typically paid by the seller. As a buyer, this means that they are not always focused on serving your specific needs. Ask other buyers what and how their experiences have been. Working with your local chamber of commerce or an entrepreneur’s association can help you network with people who have worked with business brokers before.
- See what their qualifications are. Ask how long they have been a broker for; they should be a member of the International Business Brokers Association. It is also always a plus to work with a broker who has been an entrepreneur over the course of their career. Brokers with experience starting and operating a business know how to match a business with the skills and personality of the person operating it.
- Ask if they have a niche. Many brokers specialize in serving a specific industry or niche. Working with a specialist can be the right approach for your own business. They understand what it takes to run a business successfully and will be better suited to help you find a firm that is the right fit.
- Look at marketing materials. The best way to gauge the effectiveness of a broker’s marketing campaign is to request to see their own website and some of their marketing materials. If they can demonstrate that they have a winning track record with their previous clients, then there is a good chance that they probably know what they are doing.
- Do they charge buyers a commission? Most business brokers only charge a commission on their sellers. However, some charge buyers as well. You may be tempted to work with a broker who doesn’t charge you. Before you make that decision, you should also consider that brokers who are only paid by sellers have a clear conflict of interest. You might be better off if you pay them, as well.
Always do your due diligence before working with a business broker. There are nearly 3,000 registered business brokers in the United States. Don’t settle for one that won’t be able to do the job properly.
About the Author: Kalen Smith is a business and technology writer, entrepreneur and engineer. He works with Blue Sky Formations, a company registration agency.