Business brokers generally represent sellers of businesses with an adjusted cash flow of up to $750,000. Often their bread and butter are “main street” businesses. They will gladly represent larger companies but as a practical matter there is a huge distinction in marketing mid market companies and small businesses. The buyers for mid-market companies are corporations or Private Investment Firms that are sourced both nationally and internationally. Buyers for small businesses are generally local individuals with varying motivations to purchase. There are exceptions, however, such as when a Private Investment Group is searching for an add-on to a portfolio company.
Why do I need a Business Broker?
After all, no one knows your business as well as you do. But consider this:
An owner representing himself cannot maintain anonymity. Lost confidentiality could seriously hurt the business.
Almost certainly a business owner does not have the experience, knowledge and negotiating skills needed to sell his company efficiently and for the best price.
The sale of a small business is almost always emotionally charged. The owner may have built the business from scratch and is reluctant to let go of his baby. Consequently, the owner may have unrealistic price expectations and be blind to certain key elements in effecting a sale. The owner needs objective advice.
An owner typically does not have the ability or time to contact, screen and qualify a large group of prospects to find a qualified buyer who is serious and will offer a fair price.
An owner’s talents are much more effectively utilized in running the business than in trying to sell the company. Think of the corollary: you wouldn’t want a business broker to run your business.
Selling a business can be stressful. You need a buffer.
Selling a small business is generally a one time event for the owner. A good business broker is well worth his fee.
What kind of Terms can I expect from a Business Broker?
Most business brokers will ask for at least a six-month exclusive listing agreement. This means that any disposition of the business will entitle the brokerage firm to their fee. Nevertheless, it is in your interest to have an exclusive listing so pick your broker carefully. If you insist upon a non-exclusive listing you can be assured that none of the brokers will spend much time on marketing your business. You may all get lucky, but luck is not a good strategy for success.
Commission rates will normally vary between 10 to 12 percent. Many firms also have a minimum fee for small businesses. Some may ask for a small retainer or up-front fee or advertising costs.
Our One Source M&A Contact Plan
Our One Source M&A Contact Plan is intended to locate a selection of experienced business brokers within the company’s locale or industry. We believe we can refer you to the business brokers most suited for you for three reasons:
The principal of Plexus has marketed small businesses as a business broker and knows how business brokers work for their clients and market their businesses.
For the past several years Plexus has developed a number of contacts and business broker connections in various metropolitan areas.
Plexus has initiated an aggressive nationwide marketing plan to implement its One Source M&A Contact Plan. A part of that plan is to pre-select business brokers with the necessary experience throughout the country as potential service providers to small businesses. We are continually expanding this list.
Contact us if you are considering selling your small business. First, we will let you know if we think your small business is a candidate for an add-on acquisition by a Private Investment Firm. Second, we will work with you to locate several business brokers you should interview for an outright sale.