Here is What Life is Really Like For Small Business Brokers

Among the most intriguing career choices for business people is to become small business brokers. Many people who have burned out or retired from a corporate or even a small business position are attracted to this field because of its many benefits.

But does the reality match the myths about this work? Here’s a frank look into some of the popular claims about the profession.

1. Make a six figure income your first year.

Actually that’s true. Of course the six figures include all the numbers on both sides of the decimal point.

Sure there are small business brokers making $100k plus. Most likely they’ve been at it awhile. They have proven to the genie who sits on the bag with all the gold that they’re worthy of abundant rewards for mastering the many trials put in their way. Those include, for example, the “clients” who can’t or won’t perform as promised, and the trolls who climb out from under the bridge so they can kill deals.

2. Have complete control over the way you spend your time.

What a privilege to be able to call your day your own, with no one to tell you what to do. Unfortunately it’s not the full day, just those few hours between the 11:00 o’clock nightly news and the rooster’s announcement at dawn.

Guess when that “can’t miss” session with the landlord is going to happen – the very day you had planned to start the vacation trip you’ve long promised your family.

Prospective small business brokers eagerly anticipating the chance to get out on the golf course in the middle of the day don’t know about the owners who will require hours-long meetings about their possible interest in selling out. And there are buyers who somehow get in the mood to make offers only during those holiday weekends when everyone else is at home greeting relatives and firing up the barbecue.

3. The opportunity of working with smart and successful associates.

This is very appealing to the would-be business broker who’s spent years in the workforce dealing with dumbbells and with co-workers so slow that a sloth looks ambitious by comparison.

There are bright, energetic and professional small business brokers who get things done. But don’t expect them to want to do those things with you. And you may be justified in complaining that they’re greedy and rude.

Then, when you’ve been in the business for a while, have some good listings, motivated and qualified buyers and a solid reputation, you’ll be accused of the same things. You may switch from the “for” side to the “against” side of the “cooperation” debate the first time you find out your seller’s confidential information is circulating on twitter, and discover the other broker’s buyer doesn’t understand the meaning of the confidentiality agreement. Or when you get a letter from an attorney asking you to reimburse a buyer or seller for their losses – losses caused by misrepresentations and promises that came from the other broker you agreed to work with.

4. The chance to do meaningful work that really helps people.

There will be times when a seller or buyer will actually say “thank you.” And you’ll feel good about having given the client smart advice and negotiating well on his or her behalf.

Just hope there are enough of those satisfying moments to balance out the frustrations and disappointments caused by those who stand you up, lie to you, change their minds and kill your deals.

So, while there are substantial joys and benefits for those working as small business brokers, it takes guts, determination and perseverance to make the career really yield those rewards. And it’s a good idea, when starting out on this adventure, to have a year’s living expenses in the bank.

Tips to Successfully Sell a Small Business

When you started your business you planned to grow it as a lifetime enterprise. Now, for whatever reason you have decided to sell your business and cash in on all your hard work. Maybe you want to stock up all over again in another field of business or maybe you just want to put up your feet and relax. Since selling a business is normally a once in a lifetime venture, it is unlikely that you would have any prior experience unless you have started or sold several small businesses in the past. Here is some good advice to get you started with selling your small business:

Defining your business sell expectations
In order to conclude a successful sale of your small business you need to plan the sale meticulously and the first step is to define your expectations:

  • Do you want to sell your business for cash or will you accept payment in another form such as stock or debt instruments?
  • What is your price expectation
  • What expectations do you have of the buyer in terms of business continuity and tradition?
  • Do you want to sell out to the public in an IPO or to your employees in a ESOPs scheme?

Timing and financing
It can sometimes take a long time to negotiate and conclude a sale of a business especially if there is complicated tax issues involved. The majority of small business sales involve some form of seller financing such as deferred payments so that you may not see a large lump sum of cash payment up front. Give some thought to the risk and how you would like to structure the small business seller financing.

Valuing the sell of your small business
You would need a detailed and sensible valuation of your business in order to justify the price that you will be asking for it. Decide on the method that you’ll use since methods may vary with the kind of business involved. The judgment on whether you will use asset value, replacement cost, or capitalization of earning or some combination thereof depends largely on your judgment and what a potential buyer will accept.

Re-doing your small business financial statements
As long as you are running your business, how you present your financial situation is largely dictated by tax considerations so as to minimize your tax bill. You will probably need to recast your accounts to show the true earning potential to backup any business valuation that you undertake. Though you should probably be cautious as to whom you show these records and consult an attorney in the process.

Sell small a business with privacy
It’s a good idea to sell your business with concerns for privacy. You should conduct all your sale negotiations in secret and restrict people in the know to as few information as possible. If word gets out that you are selling, you will find key employees leaving the company or being recruited by competitors, you’ll also find suppliers pulling lines of credit. This will simply impair your ability to get a decent price for your small business. The sale of a business usually screams financial troubles, you don’t want the wrong perception to get out in the public about your small business.

Use a competent small business broker
If possible use a competent business broker. Get referrals, shop around, and research. S/he will help you set a realistic price, identify and approach potential buyers in the strictest of confidence. Remember that s/he has a vested interest in getting the highest possible price since their rate for services rely on commissions of the sale.

Selling a business can take time, but due diligence will prove to breed success. One can expect a sale of their business if they’ve took the needed measures to ensure that their small business is aligned in a direction of growth and they are able to prove such statistics.

How to Find a Good Business Broker

Anyone interested in buying or selling a business should always consult with a good business broker because they posses the know-how and resources to get the best price and help you avoid the devastating pitfalls of the buying or selling process. How do you find a good business broker? Well, you go out and look. Where? The internet of course, but asking someone who has sold or bought a business is also a good source and probably the better of the two. Unfortunately not everyone knows someone who has worked with a good business broker and must rely on the expansive web to begin a search.

You should begin your search before you commit to buying or selling a business. I once had a gentleman call me wanting advice on buying a coin laundry and we went through the process of buying the business, a few things to look out for and the general principles behind how a business is priced. After a little exchange of questions and answers between the two of us it started sounding as though this buyer had not done the proper due diligence and that he was possibly overpaying. Problem was… he was already under contract to purchase! At that point even the best business broker can’t help unless you are able to find a way out of the contract, which won’t be easy if the seller is getting a premium on the transaction.

A simple keyword search for business brokers will bring about a plethora of willing brokers but the trick is finding one that is good and easy to relate with. You shouldn’t be afraid to ask questions of the broker, i.e., “What’s your experience?”, “Do you have any credentials?”, etc. It’s always nice to work with someone that clicks with you.

Things process of selling a business and what a business broker can do for you are:

Step 1 is to contact small and medium sized Business Brokers for information about how they charge, what they charge and how you generally feel about them. Select a Small and medium sized Business Broker.

Step 2 is to work with your broker in establishing the most appropriate asking price and put broker and client understandings on paper in the form of a listing agreement. The listing price is the price you agree to sell the business if the broker brings a qualified buyer willing to purchase at that listing price.

Step 3 is to supply your broker with all relevant information about the small and medium sized business so that they can complete an offering memorandum. The broker will discreetly and confidentially make the market aware of your small and medium sized business’s availability including some general information about the site.

The 4th step is for your broker to screen and qualify potential buyers.

Step 5 is for you, with the help of your broker, to negotiate a price and terms agreeable to you and a buyer.

Step 6 is the removal of contingencies explained in the contract to purchase the small and medium sized business.

The final step is to close the transaction.

Your broker will continue to work with you after the sale with any remaining terms and/or conditions of the sale until the seller is completely separated from the business.

  • Educate you regarding the process and issues faced when selling a small and medium sized business.
  • Keeping the transaction confidential.
  • Conduct a pricing analysis to determine the best asking price for your small and medium sized business.
  • Develop an effective marketing strategy to sell your small and medium sized business.
  • Put the offering package of the small and medium sized business in front of the most buyers.
  • Pre-qualify potential buyers prior to divulging sensitive information.
  • Manage transactional details and paperwork.
  • Help establish terms of sale.
  • Assist the buyer in an effort to give the transaction the most potential for a successful closing, i.e. financing.

The most important thing you can do when you are thinking of buying or selling a business is to at least speak with a broker or two. The good one is the one that gets you pointed in the right direction. Most brokers, especially the one that will care for your business, will be happy to spend a half hour to an hour talking to you on the basic points.

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