Are Business Brokers Necessary?

I receive a large number of calls from business owners who are exploring the option of selling their businesses on their own without the help of a business broker. While this option should be given some consideration in some cases, in most circumstances getting the help of a business broker offers numerous advantages that outweigh the cost.

If your business fulfills the following criteria, I would certainly recommend the help of a broker:

• The business has been consistently profitable for the last few years.
• Sales and profits have been steady or growing over several years.
• The business has been established for a long period (generally over three years).
• There is no major competitive threat that can negatively impact your bottom line in the near future.
• Your business does not require highly specialized skills that very few potential buyers would possess.

Businesses fulfilling the above criteria are in demand. A serious and competent broker will put the necessary energy and effort into marketing the business and finding the right buyer.

The following are some of the advantages of using a broker:

• A broker has experience interviewing and screening potential buyers, so you are only introduced to a few qualified buyers who are ready, willing and able to purchase your business. You save a lot of time that can be dedicated to managing your business.
• A broker is not emotionally attached to your business so he/she can help you make rational decisions and negotiate a fair deal in a reasonable period of time.
• A broker has extensive marketing capabilities, exposing the business to a large pool of potential buyers and locating the buyer who will offer the highest price and the best terms.
• A broker has sharp negotiation skills that will help you reach a win-win deal.

While broker fees are certainly a necessary cost when using the services of a business broker, in most cases, the increase in price and the time savings are worth the fees.

If, however, your business is unprofitable, too new, or has some serious issues, then you would be better off trying to sell it yourself. Most brokers either will not accept your listing or will not spend the necessary time to market it properly. The low probability of selling an under-performing business discourages most professional business brokers, especially those who work exclusively on a success fee.