Choosing the best business broker

Choosing the best business broker. 

How do you choose a business broker?   How much experience do they have?  not just in selling businesses, in the brokerage, but in owning and running businesses.  While some sales traits are industry agnostic, it is helpful to have an advisor that can give you insight into running the business and any potential pitfalls or opportunities you may face when buying a business.  

Ever month it seems like a young bright-eyed entrepreneur asks me how they can become a business broker.  Frankly, they probably find out the commission rate and think it's easy money.  Little do they anticipate the cost of advertising, the length of the sales cycle, or the inconsistency of closing sales.  A business broker may go 3-6 months, or more, without a sale, so they need to have sufficient cash reserves to survive on their nest egg.  

Find a business broker that has a heart for helping people, not just one that is trying to earn a pay check.  Salespeople just trying to earn a paycheck may try to inflate reality or push you into buying something you may regret later on down the road.  Find a business that you can trust, that is going to give you advice, both good and bad about the opportunities you're looking at and that are available in the market.  

Buyers should help them know who they are.  What are your goals.  Your background and experience.  Does it make sense for a dental hygienist to buy a construction company?  Maybe, but unlikely.  Don't buy a business that you have little knowledge of or the ability to make it successful.  While it doesn't have to be in the field of your background, you should have transferrable knowledge and skills.  Buying a business is actually a great way to change industries if you're stuck in a shrinking industry.  

Buyers are often reserved in being forthright with the business broker.  Be honest about how much money you have to invest.  You should prepare a Personal Financial Statement (PFS) and decide how much you have for a down payment, working capital, legal fees, accounting fees, etc.  It does no one any good for you to look at $5 million businesses when you only have $50,000 in cash.  

All too often, with the advent of internet groups, marketing gurus, and business evangelists, many people think they can buy a business with no money down.  When you sell a business by owner, you may think that seller financing is the option, because that's what many prospective buyers will propose.  Hiring a business broker will help insulate you from those types of requests.   However, in some industries, seller financing is needed and expected.   

From a seller's prospective, a broker can help screen the prospective buyers and qualify their ability to buy your business.  It is indeed an awkward conversation to get proof of funds for the down payment.  And now all qualified buyers have the funds to start with.  When they see the opportunity, they may need to partner with someone in order to get the necessary funds.   

In some cases, you can find a business broker that is specialized on a specific industry.   This is common for dentist offices, delivery routes and more.  One example is Roofing Business Brokers that specialize in roofing, gutter, and construction-related businesses for sale nationwide.  

So, don't select your broker, whether you're the seller or the buyer, based on who is closer to you or the first to pop up in the search.  Do a little research and find someone that has business owner experience, that is willing to understand your needs and goals, and whether there are any that is specific to your industry.   

Good luck to the sellers looking to retire and the buyers who are furthering their entrepreneurial dreams.





Location: Columbus, OH, USA

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