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FAQs for Buyers : « Search Again
Why do I need business broker? Who pays the broker’s commission? Do I need a lawyer? Can I use more than one broker? How many businesses should I look at? How do I pay for the business?
FAQs for Sellers : « Search Again
Why should I use a business broker? How are business brokers paid? How long does it take to sell a business? What happens if it doesn’t sell? How do you charge for consulting services?
Why do I need business broker?
Answer:
The difficulties in buying a business are:
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Why should I use a business broker?
A business broker can sell a business for a higher price than the owner can for two reasons: One, a broker is a professional who will identify more buyers and bridge the emotional issues that frequently kill deals. Second, owners, as the sales process becomes more consuming, are forced to stop paying attention to business operations --the very reason a buyer is interested--and can cause the business to lose value by the time of closing.
Who pays the broker’s commission?
The seller typically pays the broker’s commission unless you choose to retain the broker to represent you.
How are business brokers paid?
Business brokers usually work on a contingency fee basis. Some brokers, like accountants and attorneys, may charge an initial retainer fee.
Do I need a lawyer?
You are making a large investment with many unknowns; therefore, you probably should hire a lawyer and an accountant familiar with business transactions. A good broker can recommend support services to you.
How long does it take to sell a business?
The average selling time for privately held business is approximately 8 months, according to statistics compiled by the International Business Brokers Association.
Can I use more than one broker?
Your interests are best served if you deal with one broker, provided he/she subscribes to multi-list services. If you use multiple brokers, none will give you the attention you may need. You probably are not under contact to any broker, so you can use any or all you want.
What happens if it doesn’t sell?
The owner typically pays no contingency fee to the broker unless the business sells. You can continue to operate the business as always.
How many businesses should I look at?
Every business is unique, so you must evaluate each on its own merits. Unlike houses where you look at a large number before buying, businesses are not conducive to "comparison shopping". Few good businesses are available, and those that are will likely sell while you look for something comparable. Evaluating one business can be consuming. Evaluating two businesses likely will become confusing and nonproductive.
How do you charge for consulting services?
Consulting fees are on an hourly basis. We estimate the number of hours an assignment will require and are sensitive to staying within budget.
How do I pay for the business?
Small businesses typically require down payments of 20-50% of the value (about one to two times the business’s annual cash flow). The debt service on the balance will be between prime and prime plus 2% for 3-7 years. A business is fairly priced if the income can provide you a living, pay debt service and provide a small risk premium.
