Eva,

Most brokers will provide you with a free consultation to help determine if they can sell your business and for what price range. So its easy to explore the answer to this question by interviewing local brokers..

The fee is typically 10% of the transaction, with a minimum fee that ranges between $10k and $15k. If your business is not worth that much, say under $60k, then you might want to try and sell it yourself. Although those types of businesses are not easy to sell because there is generally not enough discretionary earnings to pay a buyer a living wage.

My advice is, if you have to ask this question then you probably do need a broker. It's a complex process where emotions run high on both the buyer and seller's side of the transaction. Having and experienced intermediary can add a lot of value to a transaction. Just look for A broker who you feel is competent and will be straight with you. A professional who you feel you can work with.

If you tell me more about your business I could be more helpful.

Web reference: ww.BizEx.net

Joe is an accomplished business management consultant professional with over 30 years of hands-on experience in management positions, as a business owner, and as a consultant to businesses. He offers a proven history of implementing, analyzing, and monitoring sales, production, inventory, vendor/supplier contracts and customer service methods to improve profitability, dependability, and growth. As a former owner/operator he knows the tremendous potential as well as challenging demands any current or future business owner must face, from start up through expansion, and evaluating strategies for acquisition and divestiture. Sales, operations, human resources, project management, and strategic planning are just a few areas Joe has extensive knowledge and practical experience. These attributes coupled with a BA in management from Stanton University allows Joe to be a valuable asset in helping any business owner achieve their goals. Joe's background and commitment to helping business owners succeed make him a valuable and unique asset to both buyers and seller alike

The answer to your question depends on what type of person you are and what you have going on in your life. Yes I am a broker, but I have bought and sold my own business with and with out brokers.

Some Facts
I would use a broker if you feel they are educated about your business.
Most brokers act as if they know about every business in the world and we do not, you know your business better than any one else. With that being said, you must have the time and enrgy to deal with the calls, e mails and trying to figure who is real and who is just calling to find out information and calls the next business broker. after they hang up after you. Good brokers have the ability to make the decision on who is a real buyer and who is not. Who has the funds and have the funds to make a deal.
A lot depends on your time and energy and how quick you are looking to sell. As well you may and try to sell on your own and get more educated on the process and if not able to sell move to select a broker. Many people go in this direction and end up using a broker>
Good Luck

Absolutely you should use a broker. But, before you do hire a broker you should interview at least three of them. Do some research on the net too. Your business may be the largest asset you own and it should be treated as such. Don't leave it to chance. An experienced broker will add far more value than the commission you will pay.

Web reference: www.btinorcal.com

Hi Eva,

I want to first apologize for probably confusing you - along with some other readers - about my earlier response. I was actually addressing Ellizabeth P.'s comments about what a horrible time she experienced in finding (or NOT finding) a professional business broker.

The answer to your question all depends on you:

•The value of a home is infinitely easier to determine than a business. Similar homes in a location can be used as a baseline. How do you value a business? There are a myriad of ways to valuate larger businesses but small to medium sized enterprises simply do not fit any particular mold in most cases. Cash flow, owner’s benefits, net income before taxes, and the Fair Market Value of existing FF&E (Furniture, Fixtures, and Equipment) help to determine a “ball park” but the market determines the final Sales Price. Your best bet is to insure that there is a sufficiently open market among many potential buyers. Business Brokers can provide that market.

•Screening a buyer can be uncomfortable for FSBO’s (For Sale by Owner) sellers - as well as the buyer. Working through a business broker gives you a professional buffer – we regularly interview and screen potential buyers so that you only meet with those folks who might reasonably be expected to make an offer.

•Do you have the time to communicate and/or meet with every interested party? As an experienced business broker, I already know that every listing will generate a flood of inquiries over time – usually upwards of 30 – 50 (depending upon the listing) but only 1 or 2 of these eventually result in an offer. The job of the business broker is to meet with each of these individuals until we find a buyer.

•Do you have the sales/marketing/accounting skills to prepare a professional package for your business? Most business brokers will prepare a package for their clients. At my brokerage, we include a website presence (on our website as well as other listing sites such as BizBuySell), a financial package that includes a cash flow analysis, owner’s benefit analysis, and an income tax return vs. financial statement reconciliation (whenever possible). This package is not only provided to registered buyers, but explained to them in great detail.

•Many buyers seeking to avoid brokerage fees are bargain hunters. It’s human nature. Just as the FSBO seller is hoping to shave selling expenses, many of their potential buyers are hoping to do the same. In many cases, any savings earned by not retaining a business broker evaporate in the negotiation process.

•What is your time worth? In an effort to avoid paying a brokerage commission, many FSBO sellers actually spend much more in terms of business disruption, lost opportunities, and their own compensation rates while working with potential buyers, vetting those buyers, researching, negotiating, and closing.

So - once again, it all depends. What you might want to do is try it on your own for a while. I think that you'll find it very time consuming and often frustrating but at least you'll have a better grasp of what it is business brokers actually do.

I also recommend that you visit my blog: AustinBusinessesForSaleBlog.com where I write about many topics related to buying and selling a business (not just in Austin) which you might find helpful.

Good Luck!
Julie A. Barnes, CPA
President, SBX, Inc.
www.SmallBusinessExchange.net

Web reference: www.AustinBusinessesForSaleBlog.com

Hi Eva,

I would find it even more interesting if business brokers did NOT recommend using their services but I think I know what you mean. I sure as heck hope that your experiences are not the norm. What I’d like to do is address each one of your points:

The business broker who commented that “once sellers found their way to him, they were – by definition – not good deals” and that he had only owned one business and would never do so again appears to be a sandwich shy of a picnic. That’s why it’s important to do a bit of research on a broker before wasting any of your time or theirs. Dealing with this fellow was simply a monumental piece of bad luck – I’ve encountered a few business brokers ill equipped for the job but never someone so bent on defeat.

The business broker who ‘knew her stuff’ didn’t. Anyone who performs a modicum of research on the sales prices of small businesses knows that there is no such thing as an immutable law of earnings multiples. By the way, I don’t particularly endorse writing a prospectus for every listing – however impressive. Most buyers of small businesses would prefer to cut to the chase and this doesn’t require a prospectus.

I have no idea where you live but it must have the highest concentration of incompetent business brokers in the nation. I happen to live and work in Austin, Texas and I can assure you that there are plenty of very talented and capable brokers here. As a CPA and owner of 4 small businesses, I certainly consider myself a business professional. In fact, one of the most difficult aspects of my job as a broker is to resist the temptation to counsel my listings right out of selling their businesses!
As to ‘price reductions’ – this is nothing more than the sellers adjusting to the market demand. I don’t care what anyone says – it is nigh impossible to precisely predict what the market will bear when it comes to small businesses.

I’m happy that you finally found a fantastic business from a private seller and a little sad that you were unable to work with a professional broker. I don’t know how much time and effort you expended before finding this jewel but my interested buyers can attest to the fact that I provide them with the relevant information necessary to make timely decisions about my listings. As to multiples of earnings – every one of my listings varies because there are a LOT of other factors that determine a reasonable and marketable sales price.

Lastly, I only make one promise to my listing owners: to do my level best to market their business to each and every qualified buyer until we find a buyer. As a boutique, I don’t sign up every business for sale – just the ones I think I can sell. I’m not working for oodles of sellers – hoping that 1 out of the 10 will sell – I’d be better off at the race track.

It’s great that you had the business savvy and time to devote to your search. There is no doubt that successful acquisitions can be made by individuals without a broker. For that matter, there’s no reason to hire a broker to buy or sell real estate – lots of folks accomplish this task themselves. I guess the question is whether you want to expend the time and rely upon your own judgment. . As I mentioned – I’m a CPA with over 20 years of experience, the owner of several businesses and a business broker – I’ve been around the block a few times but I would never consider buying/selling my home without a broker – it’s just not a good use of my expertise and time.

P.S. To BizBuySell and other posters - I apologize for posting this answer twice but I cut and pasted the first answer from MS Word and the formatting did not transfer - making it very difficult to read. Thanks for your patience.

Web reference: www.AustinBusinessesForSaleBlog.com

Rather than giving you a simple yes or no answer, I suggest you consider the following questions:

1. Do you know how to properly value and market your business for sale?
2. Do you have the time to devote to marketing, speaking with many inquiries that often lead no where, and managing the due diligence process, while continuing to manage your business's day to day operations?
3. Can you prepare a quality confidential memorandum that highlights your business qualities and financial indices that buyers care most about?
4. Do you have relationships with lenders who will help you pre-qualify your business for financing?
5. Are you a skilled negotiator?

If your answered "yes" to these questions, then you should not require a broker to sell your business. As a small business owner of several Dallas Area businesses, one of which is approaching $1M in sales/year, I wouldn't have the time nor the expertise to sell my own business were I not trained and experienced in doing so. But, please do your homework first to ensure you select a qualified broker to work with.

Best Regards,
Doug Batts,

Web reference: http://broker.bizbuysell.com/DougBattsMurphyBusiness

Hi Eva,
I would find it even more interesting if business brokers did NOT recommend using their services but I think I know what you mean. I sure as heck hope that your experiences are not the norm. What I’d like to do is address each one of your points:
The business broker who commented that “once sellers found their way to him, they were – by definition – not good deals” and that he had only owned one business and would never do so again appears to be a sandwich shy of a picnic. That’s why it’s important to do a bit of research on a broker before wasting any of your time or theirs. Dealing with this fellow was simply a monumental piece of bad luck – I’ve encountered a few business brokers ill equipped for the job but never someone so bent on defeat.

The business broker who ‘knew her stuff’ didn’t. Anyone who performs a modicum of research on the sales prices of small businesses knows that there is no such thing as an immutable law of earnings multiples. By the way, I don’t particularly endorse writing a prospectus for every listing – however impressive. Most buyers of small businesses would prefer to cut to the chase and this doesn’t require a prospectus.
I have no idea where you live but it must have the highest concentration of incompetent business brokers in the nation. I happen to live and work in Austin, Texas and I can assure you that there are plenty of very talented and capable brokers here. As a CPA and owner of 4 small businesses, I certainly consider myself a business professional. In fact, one of the most difficult aspects of my job as a broker is to resist the temptation to counsel my listings right out of selling their businesses!
As to ‘price reductions’ – this is nothing more than the sellers adjusting to the market demand. I don’t care what anyone says – it is nigh impossible to precisely predict what the market will bear when it comes to small businesses.

I’m happy that you finally found a fantastic business from a private seller and a little sad that you were unable to work with a professional broker. I don’t know how much time and effort you expended before finding this jewel but my interested buyers can attest to the fact that I provide them with the relevant information necessary to make timely decisions about my listings. As to multiples of earnings – every one of my listings varies because there are a LOT of other factors that determine a reasonable and marketable sales price.
Lastly, I only make one promise to my listing owners: to do my level best to market their business to each and every qualified buyer until we find a buyer. As a boutique, I don’t sign up every business for sale – just the ones I think I can sell. I’m not working for oodles of sellers – hoping that 1 out of the 10 will sell – I’d be better off at the race track.
It’s great that you had the business savvy and time to devote to your search. There is no doubt that successful acquisitions can be made by individuals without a broker. For that matter, there’s no reason to hire a broker to buy or sell real estate – lots of folks accomplish this task themselves. I guess the question is whether you want to expend the time and rely upon your own judgment. . As I mentioned – I’m a CPA with over 20 years of experience, the owner of several businesses and a business broker – I’ve been around the block a few times but I would never consider buying/selling my home without a broker – it’s just not a good use of my expertise and time.

Web reference: www.AustinBusinessesForSaleBlog.com

I find it interesting that all the business brokers recommend using business brokers. As a recent buyer of a business from a private seller, let me recount my experience and why I think selling privately works well, especially at the lower end (under $200K in SDE).

I, too, thought that a business broker was a must, believing the businesses market was just like the real estate market. So, I called up a local business broker (I won't reveal the name, but there were some initials in it...), met at his office, and asked him to find me a business. I told him I had cash to spend, wanted a good deal, had 2 or 3 specific business profiles in mind. He told me there were no go deals out there, that once they found their way to him, they were by definition not good deals. I asked him if he had ever owned, bought or sold a business. He said he did once, and would never again own a business or buy a business. Wha??? A salesman who says he wouldn't even buy his own product? Eek.

Then, I worked with another delightful broker who knew her stuff and was great at writing prospectuses. But, when we started discussing what I was expecting to pay for a business, and when I told her I expected to pay 1-2x earnings, she told me there was no way I could ever buy a business for less than 3-4x earnings unless it was seriously flawed in some way. This didn't ring true to me, given that the economy had just tanked and the whole world was on sale. Holding firm, she just stopped returning my phone calls.

After that, I did some due diligence on a few businesses where the broker set up an initial meeting and came with the seller to the first meeting. Universally, they were NOT BUSINESS PROFESSIONALS. They could not talk the ins and outs of running a businesses. They were passive observers. They had no sense for business strategy. It was actually quite shocking.

I also got on some mailing lists from a couple of brokers sending me listings and updates. I actually really like these. BUT, at least 5 of the businesses I found mildly interesting but too expensive have been resent to me with "PRICE REDUCTION" in the e-mail subject. Yes indeed, we are in a recession, and buyers should get real.

Ultimately, I ended up buying a fantastic business from a private seller at 1.5x earnings. No commissions to pay, no attitudes to deal with, no agendas to figure out. So....long and short:

1. If you want to sell your business, get real. Today's market justifies a low multiple. It's unlikely you'll get more than 2x. Be willing to consider 1x or less.

2. A business broker will make you promises and list your business at 4-10x. He doesn't need to sell YOUR business, just 1 of the 10 he has listed. So he has every incentive to keep prices high, but chances are your business will go unsold at these multiples, because he will stop returning phone calls from people who have cash but aren't willing to spend as much. Also, he may not have the business acumen to add much to the discussions anyway.

3. If you have business savvy, you should consider doing it yourself. There are boilerplate templates on the internet to close your deal. I am not convinced that brokers are worth it, especially at the low end.

Ok, that's just my thing. Others are entitled to their opinions.

No.

Yes

Web reference: www.fnbciowa.com

A qualified, competent, professional business broker will make you money, not cost you money. They will know how to: 1) price the business to get top dollar, 2) discreetly market the business to create competition while preserving confidentiality, 3) handle the time consuming process of dealing with multiple buyers while you keep your business running well, 4) provide negotiating expertise that addresses structure as well as price to get the best after-tax result, and 5) have the ability to close the deal after attorneys and accountants raise necessary issues that can sidetrack the parties. Look for a CBI - certified business intermediary. They are professionals who have taken the time and born the expense to attend conferences, get educated, and meet experience qualifications. Finally, ask for references and find a person you are comfortable with - trust is the glue that makes the whole process work.

Web reference: www.strategicendeavors.com

Eva,
Some of the things a professional Business B roker does is to establish a fair price utilizing estabished industry standards. A broker will also market the business through proven outlets and educate buyers so that they understand logically and systematically why a business is valued as it is and how this business could work for them. A broker will also identify and prequalify potential buyers in the strictest of confidence as well as assisting throughout the entire purchase with information and clarification leading to a successful closing.
Do you really have the time to sell your business yourself while looking after its day to day operations? What happens if your staff, customers, vendors or competition find out your business is for sale? You may know how to market the service or products your business sells, but do you know how to sell your business? Do you have a marketing plan that will work? Do you have the patience and knowledge to guide the buyer through the "due dilligence" process and get them to the closing table? Will you keep your "cool" when the buyer attacks different aspects of your business during the negotiating process? Can you screen and qualify the buyer before you reveal confidential information. Can you commit the buyer to confidentiality? Sondra

Web reference: www.bwbrokerage.com

What are you selling?

Eva,
Using an experienced, competent Broker will make your life so much easier. How do you plan to market your business for sale and run it at the same time? Are you planning to answer phone calls and emails inquiring about your business being for sale while you try to operate it at the same time. Kind of hard to keep the "sale under the radar" when inquiries come in at your place of business. Do you have experience qualifing buyers? Can you assist the buyer in obtaining the various licenses and permits required to operate your business?
Do yourself a favor and interview local Business Brokers and pick out one your comfortable with.

Web reference: www.ubibusinessbrokers.com

Eva, would you take your own tonsils out? What is your business? Should everyone in the public domain do what you do, and avoid using your business? Why? The key is the level of professionalism, and you need to know about the Business Broker with whom you are doing business. Because you want someone that knows his/her profession, well. You need to be comfortable with that person's methods of operating, and feel that he/she knows your business. If you own a Gas Station, you would not necessarily want a person that specializes in the sale of Software Businesses to represent you, any more than you want your gynecologist to take out those pesky tonsils!

The short answer is that using a broker should maximize your value. However, the challenge is that without detailed knowledge of your specific circumstances that answer might appear to be self-serving. Therefore, rather than try and convince you to use a broker please contemplate the below issues and the proper path will become apparent based on your answers.

1- Confidentiality.
Is it important to maintain the confidentiality of your sale?
If so, how can you maintain confidentiality if you are the one receiving calls from prospective buyers?
If one of your employees or key clients find out your business was for sale what would this do to the value of your business?
It is our opinion that confidentiality is critical – otherwise employees may look for another job, clients may find another supplier and vendors may tighten credit. Losing employees, clients or vendors can significantly impact the value of your business at a time when you want to extract maximum value. Most brokers know how to maintain and protect your confidentiality. If you talk with a business broker, make sure you know exactly how that broker screens buyers and when and how they release the name and details of your business.

2- Focus.
Are you actively involved in managing your business?
If so, do you realize that selling your business can be a full-time job?
Will you be able to run your business and sell your business at the same time without impacting the performance of your business.
It is our opinion, that once you make the decision to sell your business that you work harder than ever to maintain or increase the performance of your firm. This will ensure that you get top dollar, and should a buyer need bank financing the current financial performance of your business is critical to that buyer obtaining a loan.

3- Leverage.
Can you create market momentum and generate a steady stream of buyers?
Do you understand the importance of generating multiple buyers for your business even after you have an accepted offer?
Do you have the time to weed out the tire kickers from the truly motivated and capable buyers?
A good brokerage firm should be able to generate significant buyer interest which will give you the necessary leverage to maximize your price and terms. Having many buyers will also ensure that there is sufficient pressure on those buyers to consummate a transaction quickly.

4- Negotiation.
Have you ever sold a business before?
Will you be able to remain unemotional even when you receive low ball offers?
Do you how to create a sense of urgency while not overselling your business?
An experienced broker will know how to manage the negotiation process and give you maximum leverage throughout the process.

5- Value.
Have you ever valued a business?
Can you establish a price and terms based on models and comparables?
Financing is a critical component of value – do you know how to line up financing options?
Brokers do this for a living and, while the vast majority of us are not certified valuation experts, we know how to establish value and identify all the value drivers.

The above items are a few of the things to contemplate when deciding whether to use a broker or pursue selling the business on your own. Either way, do your homework and ask lots of questions to arrive at the decision that best suits your needs and objectives.

Well this is my favorite subject. While I am a licensed real estate broker, there is no way that I would want to sell my own home. Professional business brokers, those that are members of the professional associations and have advanced designations such as Certified Business Broker, are in the best position to market your business and achieve the highest possible selling price. An experienced broker knows how to recast financial statements, write professional business profiles, how to advertise your business, how to deal with buyers, and most importantly, knows how to get the transaction closed. Advertising and getting an offer is just the start! Deals die many times before the closing. An experienced broker can navigate through the potential land mines and bring you to the closing table. The old saying "The lawyer that repesents himself has a fool for a client" might apply to business sellers as well.

For more information about business brokers, go to www.ibba.org. Search for a CBI in your area.