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Why Should I Use A Business Broker?

You’ve come to the decision that buying a business or selling your business is the path that you want to take. The best piece of advice, although biased, I can offer is to retain the services of a business broker or business transfer adviser. Although business brokers usually work on behalf of the seller, there are sell-side business brokers and buy-side advisers. Even if you’re a buyer and you decide not to retain the services of a business broker or transfer adviser, you’ll receive the benefits because a business broker is working with the seller.

The broker is sort of like a clamp that holds things together as the business buyer and seller progress through the business transaction. Below I’m going to explain to you how both business seller and business buyer can and will benefit from the services of a business broker:

Let’s meet-

The good thing about the business broker is, the profession requires face to face meetings. Even though the broker is getting paid by the business seller, the buyer has to meet with the broker in order to view the business as well as so the broker can determine if the buyer is a compatible buyer for the business.

The meeting will be an interview style meeting. Some of the questions that will be asked by the broker are:

1- Can you go into detail about your background?

2- Have you ever purchased a business

3- Do you have easy access to the cash to buy a business?

4- Can you show proof of proceeds on a recent bank statement?

5- How soon are you willing to make a purchase?

In addition to the question and answer portion, you’ll also be given a personal financial statement to fill out and return. Be sure you return this information as soon as possible.

What usually takes place after this meeting is, the business broker will than present compatible business to the buyer. So come prepared with a recent bank statement showing the cash. Time is of great importance. Strike while the fire is hot and move with swiftness.

Expect for the broker to ask you to sign a non-disclosure agreement. The business seller wants to ensure that the word about the business being for sale is kept quite.

As the buyer, you’ll get to see very general financial information about the business of interest and others in the business broker has other businesses available. If you decide that you have serious interest in any of the businesses that are presented, the broker will provide you with more in-depth financial date and also arrange for you to see the business in person.

The broker will act of the best point of contact for the buyer. Any questions or concerns that the buyer may have, the broker can answer all questions concerning the business.

How the business broker helps the seller-

If you’re the owner of a business and you’ve decided to sell, one of the best services that you can retain are the services of a business broker. The broker will oversee the entire process while you continue to run your business.

The business broker will interview all of the buyers. This service by itself is worth the broker fee. Business brokers usually have access to a database of buyers that they’ve acquired over the years. These are buyers that have identified themselves are compatible and financially capable of buying a business. Having access to a list of buyers will speed up the process and help get the business sold while it’s still “hot.”

The business broker will especially prepare a marketing plan for the business in question. A sales prospectus will take time to prepare but your broker will provide you with this required document. In addition, the broker will structure the deal as well as assist the completion of the paper work.

Many owners don’t know how much their business is worth, therefore the broker can assist you with pricing your business. Te pricing of the business is just a starting point. The buyer will get an official appraisal. Between the 2 numbers, the negotiations will start there. Also, you want to ensure that your business is properly priced. You don’t want it to be overpriced not under priced A business that is priced right WILL SELL. The ultimate price of the business will be determined by what it sells for or as brokers like to say-the marketplace.

The business broker is one of the most important advisers that a seller can have on their transaction team. This broker will bring their years of experience to the table. This will help both buyer and seller and ensure both parties walk away happy.

How Important Is a Business Broker to Buyers and Sellers?

Establishments and companies change ownership at some point. As such, the services of business brokers prove to be highly valuable for both the seller and the buyer. An aspiring entrepreneur needs to evaluate a target business establishment, and this is where a professional business broker can offer valuable assistance. The seller also will find it rewarding to seek the assistance of a business for sale broker for the advertising and the negotiation facilitation with prospect buyers.

Benefits of Hiring Business Brokers

Selling a business can be a demanding and tiresome process. This can take up a lot of time and can even affect the value of the business, as you spend more time on its sale process rather than on the daily operations of the business. This is where the services of business brokers come in handy.

First off, a professional broker can give you confidentiality, and can assure you that only the prospective buyers you approve will be contacted. A trustworthy and experienced broker can save you time in screening prospective buyers in advance. Brokers can already check if a prospect buyer has good financial resources to buy your business. They will also ask buyers to sign a confidentiality and non-disclosure contracts. If you attempt to sell your business openly or independently, you would most likely damage your staff’s morale. You would also give your competitors the opportunity to spread damaging rumors about you and steal your valued customers. When you hire a business for sale broker, he can work anonymously, ensuring the protection of your business.

Moreover, selling your business all by yourself can be inefficient, especially if you lack the experience. A business broker generally has more experience, resources, and tools to effectively reach potential buyers faster and easier. However, reaching target buyers is just one part of a broker’s job; getting the best price for your business is his other important job. A professional broker should have the capacity to advertise your company in such a way that it can attract serious and financially stable buyers. This would definitely increase your benefits and advantages in selling your business.

Finally, business brokers can name the value of your business. This process involves more than just revenue or profit, thus, you may undervalue or overvalue your company, and these mistakes bear indicative consequences. For an experienced business broker, there is a rare chance to commit such mistakes.

From a business buyer’s perspective, a business for sale broker brings a lot of advantages as well. If you are a buyer and asked the assistance of a broker, you will be able to have access to opportunities that you won’t likely find on your own. If you do not have enough knowledge regarding the industry you chose, you can get helpful advice and useful insights from a good business broker. Your broker can also facilitate other essential tasks such as researching recent market conditions, current prices, and reasonable financing.

Trusting only Certified Business Brokers

With the increasing number of sale brokers out there, you may face challenges identifying which ones are trustworthy and which ones are bogus. To resolve this dilemma, all you need to do is check their certifications and experiences. The main organization that provides business broker certification opportunities is the International Association of Business Brokers (IBBA). A certified business broker should have at least one of these designations:

– Accredited in Business Valuation (ABV)

– Certified Business Appraiser (CBA)

– Accredited Senior Appraiser in Business Valuation (ASA-BV)

– Certified Valuation Analyst (CVA)

Although a certification may be a good sign that a business broker is legitimate and trustworthy, it does not fully guarantee his competence in the field. The broker’s practical experience is also an important aspect to consider in choosing which one to trust. Do some research or ask around for the number of transactions that your prospect broker has successfully closed, as well as some positive feedback regarding his experience in the industry. An insightful business broker can benefit a lot from his or her experiences, such as building significant relationships within the industry and learning from past mistakes. Certification cannot match such benefits and advantages.

While certification is a vital requirement in establishing a broker’s credibility, you should always take into account the experience of a business for sale broker before making a decision. Choose one who has the knowledge and experience that you will not get anywhere else. Don’t you agree that the role and importance of business brokers is essential to both business sellers and buyers?

Using Business Broker In the Franchising Industry for Franchise Sales

Franchising companies often use Business Broker to help attain sales goals. Here is an interesting fact. Most large Business Broker Chains promote franchises and charge franchises money to join their network and programs. Not chump change either. Then the Broker Network takes all the logos and prominently displays them in ads and websites, and titles, meta tags and key words those pages. So as to attract customers, franchise buyers. But when a franchise buyer calls up, they are sent to the local business broker who secretly hates franchises?

Why? Low success rate? No, high success rates, the broker cannot resell it in the future when it goes South, because it never does. Then he cannot get money to appraise it and put it back on the market and sell it again. In many places the same broker sells the same small business or company over and over again. Yep. That’s right, who wins? The business broker’s buddies in the Community Service Club, the attorney helping the deal along, the accountants doing the books and of course the broker who has an appraisal certificate and of course the appraisals happen to come out where? At the exact price for a quick sale and fat commission.

How fat? Fat enough for the FTC to regulate the pills and ads of such that the broker takes. $20,000 plus. But the broker will say it is hard work? Really? Selling the same company twice, three even sometimes four times is hard work? BS. But of course with franchises, the franchise fee is used to help offset costs from the franchisor’s administration costs so normally the broker can only get $10,000 to 15,000 commission. Gee Whiz whose business is he going to push first? The one with the highest commission, just like a stock broker or financial planner tries to sell insurance annuities first, the commissions are much higher, why, because they are not as good and are harder to sell?

The Business Brokers, they are on their own team, not the buyer who they swear to help or the business seller who they listed the business. Nope, and then there is the franchisor. He/She has given them use of their brand name to use on a website and they take that and use that Federal trademark to attract buyers and then switch the buyer to a higher commission. And what about the franchisors who are only willing to pay a reasonable sum such as $4,000-$6,000 commission (actually finders fee) on a $20,000 franchise fee? Well those good franchisors businesses never get promoted and never get sold, yet they are being the most true to their team and systems by keeping commissions low and saving money to in turn better their franchise system. So the business brokers charge the franchisors lots of money, bait and switch call ins for a particular franchise for a dry cleaners or a car wash or something they can turn a huge commission and quick buck on.

And they can give earnings claims since they are simply a finders fee player, if you do not believe this happens check out a recent FTC opinion on business brokers. Then the business brokers knowing the tough nature of the franchising industry tell buyers that the franchises are no good and to ask how much income the buyer will make and if the franchisor cannot answer don’t buy it. But in franchising we have laws about earnings claims where as business brokers do not. They have accounting and books to show the buyers of businesses who come into the business brokers offices.

But alas, everyone knows when the original owners of a business leave the volume drops a minimum of 20% because the new owner is not a familiar face, thus the old customers start shopping around and the excuse is they have no loyalty to the new buyer, since they always did business with Bob or Sam or the Smith family, you see? It gets worse the business brokers have a disclaimer that says when you buy a business that you realize they are not liable for any information given to you during the sale? Interesting since they are the appraisers, know the history, tell you that the franchisors are not to be trusted since they do not for the most part give comprehensive sets of earnings claims. Why? Due to lawyers and lawsuits and in adequate and unverifiable data and loss of proprietary information in disclosures.

So the business brokers use this fact to entice franchisors to list with them take their money knowing franchisors have to sell with their hands tied behind their backs then use their band name to attract buyers, then bait and switch the customers and have them sign a form stating the information might be here say (standard in the industry) check it out, and then to top it all off sell someone something that will not work and then in a year or two it is back on the market with guess who? The same broker.

I once had a discussion with some lawyers on the ABA Forum for Franchising discussing brokers and even they were unaware of this problem. You know more franchisors should be smarter and look into this. The FTC should not allow business brokers to do things that franchisors cannot. Actually they should let both do what the brokers do, but all should be truthful when doing so. Too many laws, too many loop holes, not enough jobs, not enough sales to build systems fast enough to build the economies of scale to compete with the Wal-Marts of the world. Franchising could deliver that level of fierce market competition regionally with economies of scale buying power and team work while giving back to the communities they serve and keeping the money local, but not with over regulation state by state and the inconsistencies in Canada, and with the FTC. We are allowing bad policies to dictate loopholes and never leveling the playing field, which shouldn’t have been titled in the first place. How can every one not see what is so obvious. The business brokers are using extortion to get franchisors to sign up, because they can play by different rules. It would be like playing a chess match when the opponent has two queens, Yes if you are smart you can beat them, but not often. No one knows how to deal with this problem I have stated. But I do.

Dust the over burdensome regulation and you will not find everyone trying to go around them. We are not helping consumers we are killing franchise systems and killing the franchisees (also consumer) and franchisors already out there trying to build back the job base, which is just over 2/3 of all people employed are employed by small businesses. You know the franchising model is a perfect way to build efficiency into the small businesses of the future so that they can compete with global products produced for less money and with big box stores supplying consumers with everything but giving little back to help the communities (in most cases). I hope this commentary was thought provoking, if you have any questions about it, go find out for yourself. I have had much experience with this and I know what is going on.

Surely, someone in the government regulatory area has a clue? Well, maybe not so surely, but maybe one? I bet nothing ever happens over this issue. So you consumers should stay heads up and if you call a business broker because they say they represent a franchise system, you may want to call that franchise system directly if the broker starts trying to coax you into a non-franchise business, especially one which has had more than one owner over the years. Franchising works and there is a reason, it will continue to work as long as it is not killed like so many other industries in America. Look at the devastation out there being caused by horrible policy by the frivolous lawsuits by government regulatory bodies.

To find out which business brokers are the most ethical and which business brokers the top franchises use go to; [http://www.Franchising.org].