10 Questions To Ask A Professional Business Broker

How will you market my business?
How much do you think I should ask for my business?
How will you show my business?
Do you cooperate with other business brokers?
Will you display my business on any Internet sites?
How often will you contact me about what is going on?
Can you provide any references?
Are you affiliated with any business brokerage associations or trade groups?
May I have a sample copy of your listing agreement?
Can you please tell me about you and your firm?

Business Brokerage and Mergers & Acquisitions

We are often asked -- what is the difference between business brokers and intermediaries? Or, what is the difference between business brokerage and mergers and acquisitions? Others ask - where is the dividing line between the two? Is the mid-market size business the same as mergers and acquisitions? We think the battle is really one of semantics. Many successful practitioners who handle the sale of the larger business feel that they are business brokers because thats exactly what they do. Others feel that, since they handle the larger business, they should be called something else, so they prefer the term intermediary. Now, we find that those who handle the very large businesses dont want to be called either, but use the term investment banker. It all depends on whom you talk to, we guess!

The question of what is the dividing line, at least dollar-wise, between the two is an interesting one, since business brokers tend to attempt to sell whatever theyre comfortable with and place very few restrictions on themselves. Intermediaries and investment bankers generally only handle the mid-size company and do not work on any deals that fall below that plateau. A very successful business broker told us that, several years ago, his largest deal was $23 million, and his smallest was $40,000 quite a spread. However, it shows the range in size that business brokers will and can handle.

Here is how we see the dividing lines between all of the players. Regardless of the size of the deal they are all dealmakers. Keep in mind that the dividing lines are fuzzy at best.

Businesses priced under $500,000. This category would include all of those businesses, in the SBA study used above, with 9 or fewer employees; and average annual revenues of approximately $800,000 or less. This category covers almost 80 percent of all businesses.

The Larger Business

Businesses priced between $500,000 and $3 million. This category falls between very fuzzy lines because it covers deals done by both business brokers and intermediaries. It represents most likely the top end of what a business broker would normally handle and the bottom end of what the intermediary prefers to deal with. It would include those businesses, again, referring to the SBA study, with 9 to19 employees or less and annual revenues between $800,000 and $1.7 million. This category represents approximately 9 percent of all businesses.

The Mid-Sized Company

Businesses priced between $3 million and under $20 million. Business brokers occasionally get involved in businesses of this size. This size company is the main focus of business intermediaries around the country. This is the beginning category of the true M&A practice. Businesses in this category usually have revenues over $1.7 million, but less than $5.7 million; and have between 20 and 99 employees. This category represents about 8 percent of all businesses.

The Large Company

Businesses priced over $20 million. The M&A departments of the large securities companies and the larger M&A firms generally handle businesses of this size. Many of these companies are publicly held or will be acquired by one that is. For this reason, the intermediary involved in these companies usually has a securities license. Businesses in this category generally have revenues above $27 million and over 100 employees. This category represents slightly over 1 percent of all businesses.

*Note: Figures do not add to 100 percent due to rounding.

The Basic Breakdown

By rounding some of the figures to make our breakdown simpler, we arrive at the following:

General Business Brokerage Businesses priced under $500,000, annual revenues of less than $750,000, and with fewer than 10 employees. This category represents almost 80 percent of all businesses.
The Larger Business Businesses priced between $500,000 and $3 million, annual revenues between $750,000 and $2 million, and fewer than 20 employees. This category represents about 10 percent of all businesses.
The Mid-Size Company Businesses priced between $3 million and $30 million, annual revenues between $2 million and $6 million, and between 20 to 100 employees. This category represents approximately 10 percent of all businesses.
The Large Company Businesses priced over $20 million, annual revenues over $30 million, with over 100 employees. This category represents slightly over 1 percent of all businesses.

How Can the Professional Business Broker Help?

Whether buying a business or selling one, going it alone, so to speak, can be full of surprises and pitfalls. Here are just a few of the ways that a business broker professional can assist in the sale of a business:

Help maximize the price a seller can receive for the business. Many times the secret is in the structuring of the price and terms. A seller shouldn't leave money on the table.
Create and prepare a marketing strategy. The business broker professional knows the marketplace.
Interview, educate and show the business to only qualified buyers.
Keep the seller informed of everything that is happening regarding the sale of his or her business, and provide advice accordingly.
Present all offers and point out the weaknesses - and strengths of each one.
Provide the names of other qualified advisors, if necessary and any other resources that will be helpful during the selling process.

The business broker professional is an experienced businessperson who specializes in selling businesses and helping people interested in selling and buying them. They know the current market conditions, pricing strategies and the selling process itself. They know how to market the business and work with qualified buyers. Sellers must understand, however, that the marketplace and not the business broker will determine the final price.

Why Use A Business Broker To Sell Your Business

Some business owners feel that they can sell their business themselves. After all, who knows the business better than they do. Often, these owners become sellers by simply placing an ad in the newspaper and waiting for the telephone to ring. They think of the money they can save by not paying a broker's fee. Sounds good, but it very seldom works! First, the telephone may not ring. If it does, it may be the local competition attempting to find out what is for sale and for how much. Those who may be interested will visit the business, ask a thousand questions, leave, and never come back. So much for confidentiality, proper pricing, qualifying the prospects, and finding the right buyer.

Business brokers are not magicians. They can't sell an overpriced business or create a demand that isn't there. What they can do, however, is market the business so it is shown only to qualified and interested buyer prospects. Sellers have to understand that business brokers can provide suitable prospects from the overwhelming majority of people who don't really know what they want. Very few buyer prospects really know what kind of business they want, or what best fits their needs. In fact, 90 percent of all buyers are considering buying a business for the first time, and are open to all suggestions. A business broker can supply many prospective buyers that sellers couldn't find on their own.

Very few sellers price their business properly. A business broker has a handle on the local marketplace, access to market data, and pricing information not available to a seller. Business brokers are also good sources of outside financing, if available. In some cases, the full sale price is not the issue, but rather how the sale is structured is the key to a successful sale.

Business brokers generally have a backlog of buyers that they work with on a current basis. They prepare a business profile on the businesses they represent, designed to show the business in its best light. They know how and when to advertise, when to use trade publications, how to use the Internet, and how to qualify buyers. Business broker can maximize the price of a business and create added value so that their fee is generally a non-issue. Sellers usually receive a higher price when working with a business broker, even after the fee, than they would if selling the business on their own. Remember, it almost always pays to use a professional!

Why Use a Business Broker/Intermediary

Business brokers and intermediaries can be valuable allies when it comes time to sell your business. Here are just some of the reasons why it pays to work with professional business brokers:

They help sellers establish a fair asking price - fair to the seller and the buyer. There is no sense going to market with a price that won't attract serious, potential buyers.
They sift through potential buyers and show the business only to those who are serious about business ownership. About one out of 50 people who call about a business ad are really serious enough that they will eventually buy a business.
They work on a confidential basis so the entire community doesn't know that the business is for sale.
They show the business at times convenient for the seller and will also take charge of the process.
When a potential buyer shows interest in a particular business, the broker will provide preliminary information on the business, schedule meetings with the seller, negotiate the terms of a proposed transaction, and will generally work with the parties until a satisfactory conclusion is reached.
They guide both the buyer and the seller through all the nuances of the deal, walking them through the various steps necessary for a satisfactory conclusion.
They work with the various outside professionals and act as the conduit between them.
Finally, a business broker/intermediary, will in most cases, obtain a selling price that is more than the seller would obtain on his or her own.

BUY OR SELL YOUR SOUTH FLORIDA BUSINESS