Sometimes business brokers get a bad rap and in most cases it isn’t deserved. What is most important for the success of your business sale is enlisting the right professional to help you. The handful of bad business brokers out there have made business owners apprehensive about getting the help that they desperately need during a business sale. What you need to do before you list your business with just anyone or with the first name you found online is ask questions. Save yourself the bad experience and get a good broker right off the bat.
How do you find a good broker? Again, ASK QUESTIONS. What follows are a series of articles about the questions you need to be asking a potential broker and why:
What kinds of questions should you ask a broker before you let them list your business? Part 3:
The big question for most business owners when the time comes for a listing agreement is:
“How would you price my business?”
The answer to this question will truly separate the good brokers from the bad.
Why? A good broker will advise you to price your business so that it will be appealing to buyers and so that it will sell. A bad broker will let you answer the pricing question yourself and list the business for whatever you want, regardless of how ridiculous the price you demand sounds. We all want someone who will tell us what we want to hear, but in business transactions being told what you want to hear might be setting you up for failure instead of for success.
A good broker will go through your numbers with you, will show you comparable businesses that have actually sold (not listing prices, because for the very reason above they are an unreliable guage of what your business might actually sell for) and will discuss with you what they think you should list your business for and why. There are any number of factors, like the value of your inventory or multiples of your sales figures, that will differ from industry to industry. A really great broker will know how to use all of these factors to get you the best price possible for your individual business. A bad broker will try to use the same pricing method for every business they list, regardless of the size or industry.
The other major pricing mistake is made when a business owner has hired a good broker but then refuses to listen to their advice on pricing. You may want more than your business can give you, and you need to be realistic about pricing if you ever hope to make it to a closing table. If your broker has a comprehensive argument for a specific price range, you should consider it, as you hired them for their advice. It would be a waste of your money to ignore what they have to say.
Pricing your business appropriately right from the start will bring in eager buyers while your business is fresh on the market- the best situation possible. Get yourself a good broker and then listen to their advice on how to price your business.
Are you a business owner who has wondered what kind of price your business could bring? Have you talked to a few brokers and heard vastly different prices? Do you want to know if the price you have in your head is an appropriate one? Please leave us a question or comment here, and we will be happy to assist you with your listing questions.
Want to read Part 1 of this series? Click here.
Want to read Part 2 of this series? Click here.
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