Business Brokers - Sell Business - Business Sales and Acquisitions - SunbeltNE

If you are thinking of selling a business, you may be looking for a business broker who can help match you with an appropriate buyer. However, there are too many business for sale owners who have had their fingers burnt with wrong business brokers. We hence thought of listing down some red flags you should watch out for while looking for a business broker. Some of the red flags you should be aware of are as follows:

• Huge Upfront Fees

Some business for sale owners have the bitter experience of paying upfront fees to business brokers and then regretting when, after months of being listed, their business still doesn't have any valid offers. Upfront fees may be a reasonable bet when one is dealing with the world's leading business brokerage firm. However, business brokers catering to the small business category normally charge per month or set up an agreement of commission on a successful deal. When selling a business, if a business broker asks for upfront fees just start looking at other business brokers.



• Inability to Provide References

Another red flag about a business broker is his/her inability to provide a reference of past clients. References from past clients give you an idea of the methodology adapted by the broker in selling a business and the focus of the business broker in question. That too, from a seller's perspective. Feedback from past clients is an invaluable piece of information on basis of which you should decide whether to go for that business broker or not. If the business broker is unable to provide any such reference, forget him/her.



• No Reports or Updates

You need to know exactly what activity is being undertaken to sell your business. You need a business broker who actively calls prospective buyers and not someone who just posts on business for sale websites or sends out mass mailers. Ask for regular updates on who is being contacted in the form of bi-weekly reports or personal meetings so that you are in the loop. An unscrupulous business broker may waste your time unnecessarily if you are careless in your dealings with him/her. Unless and until you are aware of what is happening, selling a business is not going to happen.



• Inability to Prove Industry Experience

One must-ask question to a business broker should be: have you sold any businesses in my industry? A business for sale process closes faster if the business broker has experience in selling similar businesses. He/she will have a database of buyers if they have dealt with a similar business in the past. They will also know how to approach a buyer and have an inkling of the negotiation process. However, not a lot of brokers specialize in a particular industry. So if the broker has a lot of experience in selling a business, you might have to let go of the 'industry-experience' factor.

A business broker is the most important person you hire for your business for sale process. The value you get after selling a business is totally dependent on the business broker you hire. Keep the above-mentioned red flags in mind so that you hire the right broker for selling your business.

It is a fact that lesser deals have been made in buying or selling a business during the past year due to the recession. However, this is not due to lack of buyers in the market. There was a lot of buying interest in the past year, but many deals didn't close due to lack of financing. In this tight an economy, a buyer needs all the help he/she can get for buying a business. As a result of this, sellers who offer any kind of seller financing find it easier to sell business. If you are planning on selling a business, consider offering seller financing, as it makes it a more attractive deal for the buyer.

When you offer seller financing while selling a business, you agree to the buyer making an initial down payment and carrying a note for the rest of the purchase price. While this arrangement has always found favor with buyers, it is considered even more important in today's tight credit scenario. With seller financing, you may find it easier to sell business. However, there are some points to keep in mind when you decide to sell business with seller financing.

• Make sure you get a down payment

Many sellers make the mistake of refusing to take the down payment after offering seller financing. Even though you are confident while selling a business that it will be profitable enough for the new buyer to be able to pay you back eventually, a down payment reduces the risk that you face in the future.

• Assess the risks

Seller financing is nothing but an investment you are making. And like most investments, it has its risks. After an agreement has been entered into while selling a business, you need to wait patiently while the buyer develops the business, makes profit and returns the rest of the amount back to you. Profitability under the new owner is also not guaranteed, and you might end up making a loss if the new owner is not a sound businessman. Take into consideration all this before you sell business, as you need to be ready to tackle difficulties which may arise in the future.

• Get professional assistance

A business deal always has a lot of complications which you might not be able to handle alone. Selling a business requires the help of professionals like business brokers, who are experts at documentation associated with selling a business. If you are also offering seller financing, you may require legal and financial advisors to ensure that the paperwork is impeccable and there are no complications after you sell business.

• Use financing to your advantage

You may think that offering seller financing is one way of selling a business easily. However, seller financing may also turn out advantageous for you in the long run. Not only may it help you find a buyer for your business for sale easily, it may also allow you to sell business for more than its valuation. A buyer may be willing to pay a bit more if a seller is offering seller financing in times of tight credit situations.

There is no one-size-fits-all solution when you are selling a business. In case you have doubts on whether you should offer financing for selling your business, you should take advice from a person who has already sold a business with seller financing. That way, you can ask relevant questions relating to your situation and then decide whether it is the right step for you. All said and done, the final decision will be completely yours. But be sure to check all avenues related to seller financing before you sell business, so that you don't miss out on any advantages it could offer you.