Hiring a business broker can be a good way if you want to sell or buy a business. A broker will find a right type of buyer who will fit in your parameters. Selling a business involves determining the right amount of based on the location and nearby amenities and finding out potential buyers. It can be very complex task, but you can easily handle all this pressure with the help of a business broker.
Your broker will be responsible to introduce you a number of potential buyers and charge you a certain amount as commission. Business owners put it on sale because of various reasons such as negative changes in industry trends, losses etc. Sometimes entrepreneurs take out a 5000 loan with bad credit and no guarantor, but it does not produce effective results. Well, whatever the reason you want to sell your business, it is essential that you choose a competent business broker.
Here are some signs that indicate you are dealing with an incompetent business broker.
Your broker does not understand your business
A broker does not need to know about your business completely, but they must have a general understanding of your industry. How will they communicate with potential buyers if they have no knowledge about your business? It is impossible to negotiate a deal if parties have no clear communication about the type of business.
A buyer must try to know the kind of product you deal in, outlets etc to make sure that you run a legitimate business. Vetting process takes forever and hence brokers avoid getting into this burden.
Never hire a broker who just asks you general questions about your business, who does not have experience in the field you work, and who is unable to identify the target market.
Your broker does not have a clear plan
When you hire a broker, you should ask them about a sale plan. Of course, they will not be able to predict how long the sale process will take, but they should have a plan how they are going to list your business to attract a number of potential buyers. An incompetent business broker will have no particular sales strategy.
In fact, they will make misleading promises that the sales will fast and easy. A broker may try to make you believe that it will be quick, but always remember that each deal is different and there is no guarantee that all types of business can be sold within that particular timeframe.
If your broker guarantees that you will get certain sales price and it will be sold in a matter of days, you should immediately understand that your broker is not worth hiring.
Your broker does not provide a business valuation
Determining the right value of your business is a very critical process. Prospect buyers will turn away if you quote higher price and you can lose profits if you undervalue your business. An experienced business broker will look over your financial records, the age of your business, business model, niche, competitors, assets, growth trends and sales network to estimate the sales price. You will get the details of the valuation of your business before the broker approaches to any prospective buyer.
Your broker must have the reasoning behind the valuation. If your broker provides instant valuation and does not have the appropriate reasoning to support the estimation, you should switch to another broker.
Your broker charges upfront fees or takes some money in advance
An experienced and confident broker will never charge upfront fees. Some business brokers do not follow the right strategy and therefore they try to charge some fee for marketing and making valuation arrangements. Such brokers are mainly scammers who take their heels off as they get money. A successful business broker will never charge any fees unless your business is sold.
The bottom line
The sale of business is not a small thing that you can complete in no time. A broker must have skills to value and market your business, finding prospect buyers and closing a deal. Make sure that you have not taken a decision in hasty and researched very well before hiring a business broker.