Selling your business is something that most business owners do only once in a lifetime. So how do you make sure everything goes well? Many business owners consider working with a business broker, an expert in selling businesses, to make sure they maximize the sell price of their business. Is this always a good idea? Lets look at the pros and cons of working with a broker:
Why you should work with a business broker when selling your business
1) A broker has (hopefully!) sold many businesses for prior clients, and you can use that expertise to learn the basics of the process and avoid making careless mistakes.
2) They can act as a facilitator to the transaction, making sure that negotiations go smoothly, the transaction proceeds at the right pace, and that the business is ultimately sold with all parties satisfied.
3) A broker may reduce your upfront costs of selling the business, as many brokers will pay for creating sales collateral and advertising the business at their own expense in exchange for a fee when the business sells. They also may have insights as to what advertising mechanisms deliver the best “bang for the buck” to make sure as many potential buyers as possible are exposed to your business.
4) They can provide expert advise related to market conditions and can help evaluate potential offers to buy your business. For example, a business broker will typically provide a free initial estimate of the sales price of your business, and can provide information on what similar businesses may have recently sold for in your area.
5) A business broker can help preserve the confidentiality of the sale. By having a third party involved, buyers can interact with the broker instead of the business owner, making it easier to protect the identity of the business for sale.
With so many good reasons why a broker can help sell a business, no wonder that most businesses that are sold ultimately involve a business broker. However, there are downsides to working with a broker that a prudent business owner should consider. buy a business
Why you should NOT work with a business broker when selling your business
1) Business brokers may charge a large commission. The amount of commission varies based on many factors, such as the ultimate sales price, geographic location, and the skills of the broker. For a “main street” style business selling for less than a million dollars, it would not be unusual to see between a 10% to 20% commission fee. Some brokers will also have a guaranteed minimum, on the order of $10,000 or $15,000. You should only hire a business broker if you believe that the time and effort involved justifies this price, or if you believe they will raise the selling price by more than the amount of their commission.