What is the Value of Using a Licensed Business Broker Anyway?

What is the Value of Using a Licensed Business Broker Anyway?

  • Maintains confidentiality
  • Knows and gathers pertinent information
  • Recasts financials to demonstrate cash flow
  • Has valuation knowledge
  • Understands goodwill value
  • Maximizes the value of the company
  • Provides an overview of some of the tax consequences to the parties involved
  • Has relationships with professional experts
  • Clarifies what is being sold
    • Identifies, describes the historical
    • Identifies, sells the future
  • Has market knowledge and understanding
  • Possesses multi-pronged marketing strategies
  • Has a database of prospects
  • Has understanding of various financing options
  • Has contacts with appropriate specialties
  • Is affiliated with other competent professionals in the industry
  • Possesses negotiating skills and understanding of emotional issues of the parties
  • Acts as a buffer between parties, thereby allowing the parties to make reasonable decisions
  • Has the ability to better control the issues and put out fires if and when they arise
  • Coordinates and facilitates sell-side and buy-side activities with various third parties such as:
    • Landlord
    • CPA, accountant, bookkeeper
    • Tax attorney
    • Transaction attorney
    • Insurance carrier or agent
    • Lenders
    • Escrow processors, title company and officer
  • Negotiates and coordinates leases and lease assignments
  • Negotiates and coordinates real estate sales
  • Permits the seller to maintain focus on running the business without any impact on production
  • Is not emotionally tied to the business
  • Is able to maintain objectivity in the process and directs the transaction to the closing table

Several Benefits of Buying an Existing Business versus a Start-up

business for saleAn existing business has a revenue stream. A business opportunity like many that we sell in the Metro Detroit area has an existing cash flow, be it negative or positive. You have a financial history of an existing business. If the cash flow is negative or not positive enough to justify a high value, you would still have some value in Good Will because an established business comes with a reputation and past customers. If cash flow is not where is should be, the buyer would need to identify things they think they could do to improve profits. Any buyer should believe that they can improve a business they are considering buying.

Another benefit of buying an existing business is the fact that the seller or whoever started the business took most of the risk already. Typically the buyer is buying the name, location, signage, phone number, website and facebook page (if included), past customers and reputation, otherwise known as Good Will. All of these items have been previously implemented and tested and will, in most cases, continue to perform. With many existing businesses for sale it’s not unusual that they come complete with well trained, quality employees and in many situations long-term employees that will help the buyer in numerous ways.

A start-up may be the best choice for many people whether it is a franchise or an independent business, but the initial cash outlay may be out of a prospective buyer’s price range. It’s worth considering that many existing businesses for sale these days also offer seller financing with low down payments available to qualified buyers.

There are many pros and cons when you are considering buying an Existing Business versus doing a Startup. Hopefully this information will help you make the best decision when buying a Michigan Business.

Should I Use An Unlicensed Business Broker to Sell My Michigan Business?

In the interest of full disclosure, I have to tell you right up front that myself and all the agents working at my brokerage are licensed by the State of Michigan to sell real estate and we work under a broker/owner, who closely supervises all transactions and business going through in the office.

Currently, Michigan does not require a license to sell a business. This information can change at any moment.  Every state requires a real estate license for the sale of real property and further, a license is required for transfer of any interest in real estate which specifically includes a lease assignment or a new lease.

According to one source, “Michigan recently required a real estate license, but a court case nullified it and the legislature might feel that they should act and require licensing for the sale of a business.” When selling a business, typically there is either a lease or real estate to be transferred or assigned or negotiated. Who do you want handling this important transaction?

There are many ways of doing business and there are various brokerage models in today’s environment. The only thing that should matter to you the seller, when you’re selling your business is “what the best thing for me?” This blog starts with a question and ends with more questions that you will have to answer for yourself. My opinion should be obvious, but in case you can’t tell, I believe that working with a licensed brokerage is in the best interest of everyone involved with the transaction, be it seller or buyer. Below are some questions for you to consider in order to help you make a good decision, along with some of the advantages of working with a licensed professional.

Can I check to see if there are any complaints for the individual or the company?

Most states have a Department of Real Estate website where you can verify license information.

Click here to check the license information for any real estate company or agent in The State of Michigan:

https://www2.dleg.state.mi.us/colaLicVerify/lName.jsp

If a business broker is not licensed with the state there’s no way to check.

Can I check to see any educational courses taken by the individual?

All states require certain hours of educational courses and passing of a test to get a real estate license. On-going Continuing Education courses are required to keep a license active and this information is usually available on the state website.

Click here to check on continuing education courses completed by an individual in Michigan:

https://www2.dleg.state.mi.us/colaLicVerify/lName.jsp

If a business broker is not licensed with the state, obviously they are not required to take yearly Continuing Education courses.

Does the company have a local office?

There are national and internet based business brokers out there. A virtual broker may be in your future. Local brokers have the best knowledge of the local market, period. Often the closing will take place in the brokers’ office too. A licensed broker is required to comply with state law with regard to handling deposits and conducting an actual closing.

Bottom Line: Using the services of the wrong type of broker carelessly can hurt your business and its value.