Business brokers, also known as intermediaries, help clients buy or sell private businesses. They handle everything from valuing the business to advertising it and negotiating the right price with buyers or sellers. Becoming a successful business broker requires a comprehensive understanding of business valuation and operations, and in some states, certification is required.
Part 1: Deciding to Become a Business Broker
Step 1: Understand What a Business Broker Does
A business broker acts as a deal maker between buyers and sellers of businesses. They typically represent the seller, but can also represent buyers, both parties, or act as neutral intermediaries. Their responsibilities include:
- Finding business owners looking to sell
- Estimating the fair market value of businesses
- Creating sale listings and advertising the sales
- Identifying and vetting potential buyers
- Negotiating purchase deals
- Assisting buyers in acquiring proper funding
- Ensuring all necessary paperwork and legalities are handled
Step 2: Know What the Job Will Require
Business brokers need skills in accounting, financial analysis, sales, and negotiation. New brokers must build relationships and handle numerous rejections before making their first deal. The job involves long hours and repetitive tasks but can be rewarding for those with an entrepreneurial spirit.
Step 3: Look into the Job Market and Compensation
- Compensation: Brokers earn commissions, typically 8-12% of the sale price. Larger sales bring in larger commissions.
- Market Opportunities: The market for business brokers depends on the economy and regional demand. With relatively few brokers in the country, there are opportunities for new brokers.
Step 4: Be Willing to Budget Your Finances
As income from brokerage can be irregular, it’s crucial to save and budget wisely. Avoid large expenditures until you have a stable income stream.
Part 2: Setting Up for Success
Step 1: Cultivate a Business Background
Experience in owning or operating a small business or having a corporate background can be beneficial. Understanding business operations is essential.
Step 2: Work on Personal Attributes
Develop attributes such as sales aptitude, diplomacy, determination, and the ability to cultivate relationships and understand businesses quickly.
Step 3: Investigate Training Options
Look for reputable training programs for business brokers. The American Business Brokers Association and other organizations offer training and support.
Step 4: Learn the Requisite Skills
- Financial statement analysis
- Business appraisal methodologies
- Marketing packages creation
- Confidential marketing techniques
- Buyer/seller meeting facilitation
- Negotiation strategies
- Closing transactions with proper documentation
Part 3: Working as a Business Broker
Step 1: Apply to Join an Existing Brokerage Firm
Gaining experience at an established firm can provide mentorship and training, helping you build a successful career.
Step 2: Join Another Type of Office
Consider joining real estate offices, accounting firms, or other related businesses that might need brokerage services.
Step 3: Get Licensed in Your State
In some states, business brokers need to be licensed as real estate brokers. Check with your state’s department of real estate for specific requirements.
Step 4: Become a Certified Broker
Obtaining certifications like the Accredited Business Intermediary (ABI) or Certified Business Intermediary (CBI) can enhance your credibility and marketability.
Step 5: Start Your Own Practice
If you prefer to work independently, starting your own brokerage can be cost-effective. Ensure you have operating capital to sustain your business until you close deals.
Part 4: Finding Success
Step 1: Build Up Your Relationships
Persistence is key. Build relationships and referrals to get deals. Understand it may take several months to see results.
Step 2: Give Each Deal Your All
Invest time in understanding each business you represent. Show clients that you are committed and knowledgeable.
Step 3: Respect Your Clients
Handle client issues with respect and courtesy. Help them prepare their business for sale without judgment.
Step 4: Work Towards Becoming Specialized
Specializing in a particular industry can help build your reputation as an expert and increase referrals.
Community Q&A
Q: What is the average commission paid to a business broker? A: The average commission is typically 8-10% of the sale price of the business, with a minimum commission of $10,000. This commission is usually paid by the seller unless negotiated otherwise.
By following these steps and continually working to improve your skills and knowledge, you can become a successful business broker.
