90% of all business purchases are never completed, and 50% end in the due diligence stage.
This trend isn’t due to a lack of interested buyers. 50% of Americans want to own their own business, and there are at least 15 prospective buyers for each business that enters the market. The problem has more to do with a lack of help from qualified business brokers.
If you’ve ever wondered “what is a business broker,” you’re not alone. They’re only involved in approximately 10% of all business deals. More reliance on their experience and professionalism would lead to more completed business deals.
Read on to learn 5 things you need to know about business brokers, including what they do, the benefits they provide, how much they charge, how to hire one, and how to become one.
1. What Is a Business Broker?
The best way to answer a question like “what is a business broker” is by answering another; “what do business brokers do?”
A business broker’s most important job is to help their clients make the right business decisions. They use their experience to provide information and advice to help them meet their goals.
Most of these decisions involve the process of buying or selling businesses. The broker represents and serves as an intermediary between buyers and sellers. They’re a neutral third party whose only goal is finding a fair deal.
Daily tasks for a business broker include setting appointments, client meetings, negotiating sales, and completing paperwork. The end goal of all this work is to help you make informed business decisions.
2. What Are The Advantages of a Business Broker?
Business brokers have extensive knowledge of when and how to sell a business. They understand the current market and how changing trends affect it.
Their price recommendations are credible and keep owners from underselling or overpricing their business. This is especially important for unique niche businesses that are hard to determine a value for.
Business brokers also reduce the amount of time a business spends on the market. They already have a pool of potential buyers and sellers.
Business brokers are also effective marketers. They know how to speak the language of truly interested buyers who are willing to pay a fair price.
Business brokers know all the local and nationwide legal requirements and regulations to follow when selling or buying a business. They’ll help you avoid a messy legal issue later.
3. How Can I Hire a Business Broker?
Business brokers may work in firms or be self-employed. Do a bit of research to find one in your local area.
When hiring a business broker, consider several factors to find the best fit.
Check how many businesses they’ve sold before. Look at their closing ratio to see what percentage of their efforts were successful.
Find out if your business broker will be entering into an exclusive agreement with you. This prevents you from working with anyone else until the sale is complete, but it also speeds up the negotiation process.
Make sure that the broker is familiar with businesses in your industry. They should have already sold plenty of businesses like yours.
Ask how much commission the broker will receive and what additional fees they charge. They should be upfront about these costs from the beginning.
4. How Much Do Business Brokers Charge?
Business brokers need to make money, and they take a percentage of every sale they help complete. This may include a 10-12% commission on the value of the business and 6% on any associated real estate. Amounts for gas stations, grocery stores, and hotels may be less.
There may be additional fees for other services, which is why you need a transparent bill. Your business broker should be willing and able to tell you everything they’re charging you for before you sign on the dotted line.
5. Where Can I Find Business Broker Jobs?
The salary range for business brokers in the United States is $50,047-$66,671 with an average of $58,102. It’s a lucrative career that allows you to help clients cultivate profitable businesses.
If you want to enter this career field, look for openings at a local firm or start your own. Make sure that you have the education, qualifications, and skills to attract clients.
Education and Qualifications
The first qualification you should reach for is a business degree. A bachelor’s in accounting or business is the bare minimum, but an MBA or Ph.D. will make you more credible.
Not all states require business brokers to receive a real estate license, but getting one is worth the effort even if it’s not mandatory. It allows you to help clients buy and sell property without partnering with a licensed realtor.
Increase your credibility with a Certified Business Intermediary certification. You can earn it by completing courses provided by The International Business Brokers Association. Joining the organization also gives you additional networking and continuing education opportunities.
A valuation analyst certification is another optional but helpful form of continuing education. You can receive it from the National Association of Certified Valuators and Analysts. Look into credentials such as Certified Business Appraiser, Certified Valuation Analyst, and Accredited Valuation Analyst.
Most qualified business brokers have previous business ownership experience. This helps them understand what it means to own and operate a business and how to use market trends to know when to buy and sell.
Interpersonal skills are just as important. You’ll need to communicate and motivate others to make the right decisions without coming off as abrasive or pushy. Clients who trust and feel valued by you will be more likely to return and recommend you to their friends and family.
Time management skills will help you manage all your tasks efficiently. They’re especially important if you work with multiple clients at once.
Where Can I Find the Right Business Broker?
Knowing the answer to a question like “what is a business broker” could determine whether or not you get a fair deal when buying or selling a business.
Business brokers use their experience to help you make the right business decisions. If you want to become one, start by getting the right qualifications. Work on your interpersonal skills to build up a client base that trusts and respects you.
Visionary Business Brokerage is a process-oriented small business consulting firm. Contact us today to see how we can help you realize your dream of owning a business.