You’ve always dreamed of starting your own business. You have some ideas of what you want to do, but you aren't sure which are best. Taking over an existing business might be a better choice than starting something from scratch‚ but how do you find a firm for sale that is the right fit?
One way is to use the services of a business broker. This type of professional is like a real estate broker, but instead of helping to sell property, the business broker helps in the sale of the business itself—its brand name, customer lists and other assets.
If you’re buying a business, a good broker can help match you up with one that suits your needs, interests and budget – perhaps coming up with something that might never have occurred to you, but which turns out to be a suitable choice. For example, a Florida couple, John and Kathleen Smee, took over a pool-cleaning business after a broker brought it to their attention; not what they had had in mind when they started looking for a business, but a decision that worked out for them, according to Slate.com.
You can also use a business broker if you have an existing business to sell. Either way—whether you're buying or selling—here are some tips to keep in mind when using the services of a broker:
1) Not all states license brokers. In fact, only 17 do so. As an alternative, you can check out the International Business Brokers Association (IBBA), a trade group for business brokers that promotes standards in the profession; you can find a directory of its 1,000 members online.
The IBBA awards the Certified Business Intermediary (CBI) designation to members who have gone through certain minimum levels of training (68 hours of business brokerage courses, at least three years of experience, and passage of a CBI exam).
2) Whether licensed or certified or not, you’ll want to check out your broker much as you would any other professional you are considering using. Find and verify references, such as past customers; check with the Better Business Bureau for complaints; and seek referrals from people in related professions who are likely to have had dealings with the broker, such as bankers, accountants, lawyers and financial planners.
3) Remember that business brokers are usually paid by the seller. If you’re a buyer, your interests may not be foremost in the brokers’ mind.
4) If you are selling a business, you should expect to pay a commission of about 10 percent, though this can sometimes be negotiated down, says consultant and former broker Mary McCarthy. Anything much higher should raise caution, as should any upfront payment before a sale is made. (Of course, be sure to iron all this out before you sign your contract.)
5) When seeking a broker, look for someone with specialty in your niche, your region, and your price range, says Entrepreneur.com. If your broker is used to deals in the $5 million range and you only want to buy or sell a business worth $500,000, it may not be a good match.
6) Make sure that you communicate well with the broker—that you are on the same wavelength and that he or she is responsive to your calls and concerns. After all, you will need your broker to help you find or sell your small business. Lorna Collier is a Chicago-area writer whose articles have appeared in the Intuit Small Business Blog, Workforce Management, Crain’s Chicago Business,CNN.com, USNews.com, the Chicago Tribune, and many others. You can follow her on Twitter at @lornacollier.