When searching for a business broker to represent you, it is imperative that you do not sign with the first person you speak with or interview. Fact is, over the years business brokers have developed a bad name for the industry. The following are just a few points to consider:
1) How well does the broker know the industry you are in? Does he/she have a history of selling businesses like yours, or do their current listings reflect otherwise? For example, my niche market is route distribution businesses RoutesForSale.net. This is an industry that I am extremely knowledgeable on, and worked in for 15 years.
2) Make sure the broker answers their phone, and returns your calls in a timely manner. I can't begin to tell you how many clients I have that complained about their previous broker not communicating with them for weeks after receiving their listing. There is NO excuse for not answering the phone or responding to an email with today's technology advances. If this happens, then you are not dealing with a professional.
3) Seller's have your broker explain the listing contract in detail (line by line). Too many brokers trap their clients into contracts without explaining the terms upfront. Including long term contracts, collecting commissions on buyers they did not procure, and cancellation penalties. In other words if you bring the buyer you still owe them a commission... I do not believe in holding my clients hostage, if I don't bring the buyer, then as far as I am concerned, I didn't earn the commission.
4) Buyer's be careful, or at least aware what you sign when inquiring about a business listing with a broker. Other than signing a standard Non Disclosure and Confidentiality Agreement, and maybe providing some financial documentation, there is no need to sign anything else unless you decide to purchase the business. There are brokers that will have you sign a buyer's agreement that allows the broker to represent you in future transactions and collect a commission even if you no longer want to use them. Unless you only want to work exclusively with the current broker you are using as a future buyer agent, you could very well find yourself owing that broker money out of your pocket should you buy from someone else that does not co-broke.
5) Fees will vary from broker to broker, but the standard commission rate for business brokers is 10%. I personally find that rather high, as do most of my clients. Fact is the majority of brokers are not good at marketing a business, and rely on other agents to bring the buyer by offering 5% commission to anyone that procures a buyer. I have mastered the marketing skills needed to bring a buyer on my own. The end result for my clients is a faster turn around time when selling their business, better reliability and communication between the buyer and seller, and an extreme discount in brokerage fees to my clients. My fee is only 4.9% (a 51% discount compared to most brokers).
If you have ever sold a home or property and worked with a Realtor, a good rule to remember when selling a business is to treat it as a real estate transaction. There are a lot similarities, and 16 states require an actual real estate license to broker a business.
