Selling a Business? What Not to Expect From a Business Broker - Part 1
As a business broker in New Jersey I have worked with business owners in a variety of industries.
In most cases this is the first time they are selling a business.
Many of these sellers have false expectations of what a business broker can and cannot do.
Business brokers provide a valuable service to our clients, but we are not magicians.
In this two part article I will suggest some tips for you to consider when working with a business broker.
My first suggestion is to not let a business broker sell your business without first performing a valuation.
Most brokers will do a market valuation at no charge.
This market valuation should give you a reasonable idea of what price range to expect for your business.
If the price range is too low you certainly would not want to waste your time or the broker's time.
If the price is much higher then you should understand why and make sure that the business broker is not giving you an inflated price to get your listing.
It is rare that I have given a first time seller a price which is higher than what they expect.
As we say in the business, everyone loves their baby.
As mentioned earlier, a business broker is not a miracle worker.
Please do not expect them to find a qualified buyer that will pay you a premium above a reasonable valuation.
There is so much information on the internet and buyers are more educated than ever.
Buyers also work with advisors such as accountants so it is unlikely you will find a buyer willing to overpay.
Related to this request, I have had potential sellers propose that the broker work on a sliding commission scale based on the sale price of the business.
They usually suggest a lower percentage based on a lower selling price.
As I explain to them, I cannot force a buyer to pay more for a business than they are willing to pay.
My job is to attract as many qualified buyers as possible to get my client the best price possible.
The market will determine the final price of their business, not the broker.
Whether the price is higher or lower, the broker performs the same amount of work and should not be penalized for their client accepting market value for their business.
A business broker should never hide information from a buyer.
Sometimes I will discover that a competitor is opening up nearby or that a valuable employee has left, or an important client has been lost.
As I pointed out earlier, buyers are more sophisticated these days particularly with all the information available on the internet.
They are well schooled by their advisors and will most likely discover whatever is being hidden during due diligence.
The end result is that they will walk away after you and your business broker have invested considerable time.
In the second part of this article I will cover more tips on what not to expect when working with a business broker.
In most cases this is the first time they are selling a business.
Many of these sellers have false expectations of what a business broker can and cannot do.
Business brokers provide a valuable service to our clients, but we are not magicians.
In this two part article I will suggest some tips for you to consider when working with a business broker.
My first suggestion is to not let a business broker sell your business without first performing a valuation.
Most brokers will do a market valuation at no charge.
This market valuation should give you a reasonable idea of what price range to expect for your business.
If the price range is too low you certainly would not want to waste your time or the broker's time.
If the price is much higher then you should understand why and make sure that the business broker is not giving you an inflated price to get your listing.
It is rare that I have given a first time seller a price which is higher than what they expect.
As we say in the business, everyone loves their baby.
As mentioned earlier, a business broker is not a miracle worker.
Please do not expect them to find a qualified buyer that will pay you a premium above a reasonable valuation.
There is so much information on the internet and buyers are more educated than ever.
Buyers also work with advisors such as accountants so it is unlikely you will find a buyer willing to overpay.
Related to this request, I have had potential sellers propose that the broker work on a sliding commission scale based on the sale price of the business.
They usually suggest a lower percentage based on a lower selling price.
As I explain to them, I cannot force a buyer to pay more for a business than they are willing to pay.
My job is to attract as many qualified buyers as possible to get my client the best price possible.
The market will determine the final price of their business, not the broker.
Whether the price is higher or lower, the broker performs the same amount of work and should not be penalized for their client accepting market value for their business.
A business broker should never hide information from a buyer.
Sometimes I will discover that a competitor is opening up nearby or that a valuable employee has left, or an important client has been lost.
As I pointed out earlier, buyers are more sophisticated these days particularly with all the information available on the internet.
They are well schooled by their advisors and will most likely discover whatever is being hidden during due diligence.
The end result is that they will walk away after you and your business broker have invested considerable time.
In the second part of this article I will cover more tips on what not to expect when working with a business broker.
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