Buying & Selling a Business In Tucson Blog

Red Flags When Choosing a Business Broker, from Inc. Magazine

 

 

 

This excellent article appeared recently on the INC Magazine blog at http://www.inc.com/articles/2001/10/23561.html#comment-51927727 

When selecting a broker to sell your business, be suspicious if:

The broker wants a significant or total fee paid upfront. Many brokers have begun taking upfront fees, but generally the total fee is a combination of an upfront 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.

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.

This excellent article appeared recently on the INC Magazine blog at http://www.inc.com/articles/2001/10/23561.html#comment-51927727 

Copyright © 2001 Inc.com LLC

If you'd like more information on this subject, please contact us at 520-327-4454 or visit us at www.allenandyoung.com

A Business Broker Should Educate You Before Selling Your Business

Have you listed a business for sale in the past?  Do you have a business listed for sale now? Or are you considering listing a business for sale in Tucson sometime in the near future?  Have you worked with a business broker during this process?

If so, ask yourself this important question: did your business broker take the time to educate you about the process of buying and selling a business in Tucson?  Or did they just ask you the price you wanted to put on your business, give you a copy of the listing, and disappear without setting expectations and ground rules for managing the process of selling to your best advantage?

Do you know what kind of listing you have?  What are the price, and terms?  The commission structure?  Even if you think you have experience in all this, the fact is that most sellers can make simple mistakes that end up being costly during the sale process.  And when they do, it's actually their broker's fault for not spending enough time with them to fully prepare them for every contingency.

Here are a couple of examples of situations that can cause you problems if you're the seller:

1. Handling Buyers: 

• Do you know what your listing agreement says about how to handle buyers that walk in the door unexpectedly?  Most sellers assume that these buyer prospects are theirs without having read the agreement. But they could well belong to the broker.
• Many buyers will return to the business and try to find the seller after being shown the business. They may ask the seller to quote a price, or to show them books and records. 
  
• This could put you in a difficult spot in front of others, and severely compromise your negotiating position. 
  
• Did your broker coach you on how to handle such situations?

2. Keeping Your Business For Sale Listing Quiet:

• If you really want to keep secret from your employees, customers, suppliers and competitors the fact that your business is for sale, have you considered how hard that is going to be if you're the one dealing with buyers?   
• One of the most important roles of a broker is to shield you from these conversations, and handle them for you.
• Is your broker playing this role for you?
  

If you're considering selling your Tucson business, make sure that you know as much as possible about every step in the process of selling a business before you start.  That way, you can avoid being caught off guard by events and surprises along the way.  Click here to take a moment to walk through the steps of selling a business.

And remember, if there is something, anything, about the process of selling your business that you are not completely clear about, and you're already working with a business broker, then you have the right and should ask that person for a detailed explanation.

 

If you'd like more information on this subject, please contact us at 520-327-4454 or visit us at www.allenandyoung.com