Questions to Ask a Business Broker
By: Carole Matthews
Use these questions to find a competent and successful business broker.
What is your background/experience? It takes time and experience to be able to understand the nuances of businesses," says Jeff Jones, chairman of the board of Certified Business Brokers LC in Houston and president of Certified Appraisers, Inc., the firm's appraisal practice. According to Jones, the average age of a business broker is 55, and for good reason. A competent broker needs experience in valuation, a fair amount of accounting experience, knowledge in the legal aspects of selling a business, salesmanship, and patience. In short, a good broker has been around the business block before entering the profession.
Are you a member of a trade association? Do you hold any accreditations?
"If a person in a profession is taking time to belong to an association and attend, it shows you that the member is attempting to stay current within his or her profession," says Mark Putnam, executive director of the International Business Brokers Association in Chicago. The IBBA also accredits business brokers with the designation of certified business intermediary (CBI), a recognized designation in the business. Someone who has the designation has passed courses and a final examination. "It's one indication that you're dealing with an experienced individual," Jones adds.
What services do you provide?
The broker should offer to help you price the business, and should be able to show you how to package and market your business, says Cooper. After you've heard two or three proposals, you'll get a good idea of the type of services available to you. "Remember, however, that you are hiring a sales professional with strong financial skills, so look for signs that your broker is just that," he adds.
Can I talk to the owner?
If you're not personally dealing with the owner of the firm, ask to speak to him or her, suggests Tom West of Business Brokerage Press in Concord, Mass. Ask him or her the questions you asked of the person whom you initially contacted. Do you get the same answers? Also, ask what kind of recourse you have if you're not getting any activity on your business. And if you keep calling for the owner of the firm and you don't get a return call, says West, cross the firm off the list.
What kinds of tools do you use to research buyers?
"Before the Internet, if you wanted to sell your Atlanta automotive body repair shop, you were probably stuck looking for buyers in Atlanta," says Putnam. Today, the Internet has made the world smaller for sellers, and a good broker takes advantage of that. "It's a proactive approach to finding buyers as opposed to strictly posting that this business is for sale and letting people come to you," he adds. Additionally, the broker should have at his or her disposal research tools, such as Dun & Bradstreet, Capital IQ and One Source, and use them to find buyers and general information about the profession or industry in which the seller is active.
How will you market the business?
Discovering what tools a firm has in its marketing arsenal will help you determine just how committed they are to selling. "Every business needs a little different approach to its marketing campaign and every business brokerage firm is a little different, so there are many combinations of campaign strategies that might be appropriate," says Cooper.
Look for a variety of ways to that the broker reaches sellers: ads in local papers and trade publications, listings on such Web sites as bizbuysell, mergernetwork and BizQuest for businesses over a $1 million asking price. It's also a good idea to get on the Internet yourself, act like a buyer, find out where listings for businesses similar to yours show up, and then ask the broker if they list there. Ask to see the printed marketing materials the broker puts out for clients. Look at their brochures and presentations, assessing completeness and how well-written they are. Jones also suggests asking whether they approach similar or complementary businesses about mergers, which shows you the broker is casting a wide net for buyers.
Note: We use 17 Major Website for business that we have listed.
From $20,000 to $40,000,000
Copyright © 2001 Inc.com LLC
Red Flags in Choosing a Business Broker
By: Carole Matthews
When selecting a broker to sell your business, be suspicious if:
The broker wants a significant or total fee paid up front. Many brokers have begun taking up front fees, but generally the total fee is a combination of an up front fee and commission paid upon sale of the business. But in what Glen Cooper, president of Maine Business Broker's Network in Portland, Maine, calls a "take away" sale, an unreliable broker meets with you, runs some quick numbers, tells you that you can get your price or even more for your business, and then asks for a check to get started. In many cases, business owners are so relieved that they've found a broker and elated that they'll write a check on the spot, without checking any references. "They get to 'take away' your check when they leave," says Cooper. "You'll never see them again, if they can help it."
During your first meeting , the broker says he or she can get your asking price or higher. Be wary of too much optimism. "The key to selling is that the price be reasonable," says Jeff Jones, chairman of the board of Certified Business Brokers LC in Houston and president of Certified Appraisers, Inc., the firm's appraisal practice. And according to Tom West of Business Brokerage Press in Concord, Mass., most owners overvalue their businesses. An unreliable broker might suggest after a brief meeting with you that he or she can get you your asking price or higher for your business.
The broker doesn't have a Web site. Most likely, if the broker doesn't have a site, he or she is behind the times. The Internet is a powerful marketing tool for business brokers, according to Cooper. Is the site well-written? That's another way to gauge a broker's competence, he adds.
As a point of information, I am proud to have invested in and own the following Web Site Addresses (URL's) that drive BUYERS to my site. QUESTION and view the web site of any Broker you are looking at hiring to sell your business. Does he have web addresses that are easy to remember, spell & decipher. These are mine. There all .com's and they speak for themselves.
www.SouthFloridaBusinessBrokers.com
www.TreasureCoastBroker.com
www.TreasureCoastBusinessBroker.com
www.BuyaFloridaBusiness.com
www.SellaFloridaBusiness.com
www.BusinessSellersBroker.com
www.SellSideBroker.com
www.TransworldMandA.com
www.FloridaMandA.com
www.FlBizBroker.com
www.FlBuyaBiz.com
www.FlSellaBiz.com
www.MilesReese.com
www.FlBusinessMLS.com
www.FlBusinessListings.com
www.TWorldBroker.com
www.ICreateWinners.com
www.JustBusinessListings.com
www.SpecialForcesBroker.com
plus a load more! I'm in the business.
The broker can't or won't show you printed marketing materials. "Today, all brokers prepare some kind of offering summary for each business they represent," says Cooper. He or she should be willing to share materials prepared for past clients to show you how they might handle your business.
The broker doesn't seem well grounded in business valuation. "Your broker should be able to explain business valuation to you clearly," Cooper says. If he or she can't, then how can he or she explain to a buyer what your business is worth? Make sure your broker is confident in this area.
The broker is not licensed to sell or lease real estate in your state. Ninety-two percent of business brokers have a real estate license, according to an annual survey of business brokers West conducted. Even if your business doesn't include real estate, make sure your broker carries the license. "Unlicensed brokers are usually new to the business or out-of-state con artists," warns Cooper. And just because the broker holds a real estate license doesn't mean he or she should be selling commercial or residential real estate too. A good broker will hold the licenses but be focused on selling businesses.
Copyright © 2001 Inc.com LLC
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Value...What is it?
Value, whether it is related to a business, house, collectable, stock, or any other marketable item, is subject to a number of variables. Some of these variables are easily measured and factored into the value calculation. Other variables impacting value can be subjective, and not easily measured. The value of a business is impacted by both subjective and easily measurable factors. Subjective factors are based on the viewpoint of the different people (or stakeholders) involved. It is not uncommon for the value of a business to be interpreted differently by two people viewing the business from different lenses or perspectives.
In a similar way that houses or any other asset traded in a public marketplace are appraised to define a common value based on standard appraisal concepts, businesses are valued based on a defined set of basic criteria. The standard methodology to valuing a business allows for potential buyers, lenders, and sellers to assess a business with common standards.
It is not unusual for the perspectives of a lender, seller, and buyer regarding the value of a business to be inconsistent.
The Lenders Lens
Lenders are interested in getting the money back that they have loaned to buy the business. The lender generally looks at the business through a slightly pessimistic lens (which they may call realistic). They critically assess the buyers background in terms of ability to repay the loan. Lenders apply standard ratios (such as debt coverage ratio) to evaluate the risk associated with a business loan. The value of a business is based on the defined ratios in relation to the risk tolerance of the lender.
The Buyers Lens
Buyers are typically assessing a number of business opportunities to determine which one (if any) make sense for them. In looking at various businesses, buyers have the unique opportunity to objectively review the different business using a number of metrics including 1) Gross Sales, 2) Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA), 3) Owners Discretionary Income, 4) Listing price, and a number of other evaluation criteria. Ultimately, buyers are interested in getting the best deal possible on a business that fits their needs. Assuming a business fits all of the buyers needs in terms of profile, value to a buyer is in large part based on the return on and of investment. It is important for a buyer to be able to clearly see how the business can generate the required financial return and allow the buyer to obtain financing if needed to buy the business.
The Sellers Lens
 Sellers have worked hard to build the business that they are now planning to sell. In many cases the sellers business represents a lifetime of sweat, and perseverance. The seller usually has a great deal of pride in the business they have built, and generally know how the business has operated over time. As a result, sellers are usually very confident in the ability of the business to generate cash flow based on the historical financial statements.
It is often hard for a seller to see a potential buyer or lender objectively questioning the performance of the business. Sellers tend to see value in their business with very little adjustment made for risk or unknown factors. In fact, this may be the most accurate lens of value, however in order to sell the business, a seller, buyer and lender need to see similar value.
I will helps to bring the lens of each stakeholder into common a focus.
Financial Statement Review
Financial statements and accounting practices of a business are typically designed to minimize taxable income. The financial performance of a business is assessed using the net financial benefit to the owner as opposed to simply pulling the taxable income from the P&L statements. You may have heard the process of adjusting the financial statements referred to as Earnings Reconstruction (ERCON), or Recasting. The reconstructed net benefit is referred to as Net Owner Benefit or Owner Discretionary Income. Other adjustments are usually also required to normalize the financial statements to reflect the true picture. These additional adjustments typically include 1) reducing depreciation and amortization expenses, 2) reducing interest expenses for existing loans (not transferred with the business), 3) pulling out owners compensation and replacing it with a fair market compensation for a replacement manager, and 4) adjusting for other owner perks that are considered discretionary.
Review of the financial statements can be confusing, and the I can help make the process seem effortless.
Other factors that can affect business value
Many other factors should be considered in the assessment of the value of a business. Other factors can include:
Call Miles, your business sales expert, at 772-419-8303 and take that important 1st step.
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