Business brokers can be the fastest method of selling a business. In most cases, there are full-time business brokers in mid-size or larger metropolitan areas. A few real estate brokers handle very small businesses (often involving sale of commercial property) in some mid-size or rural areas.

Brokers vary widely in their competency. The better ones belong to professional valuation societies. They will carefully screen potential buyers for suitability and financial ability to buy a business and sustain themselves during the initial ‘breaking in" period. Brokers always represent the seller, although there has been recent discussion in some quarters of buyers paying a fee to retain brokers as consultants.

If you are selling a business, you can retain a broker by signing an agreement for the broker to represent you. The agreement is usually exclusive (i.e. you may only retain one broker at a time). Also, the broker contract should state that the broker will keep all of your information confidential. The fee (usually expressed as a percentage of the sale price) should be clearly stated in the contract. Any leads you have generated on your own should be written down as exceptions not subject to the broker commission.

Business broker commissions recently range from 10% to 15% on smaller businesses (those valued under $300,000). For mid-size businesses (those with valuations up to $10 million), commissions can be as low as 8%, usually utilizing a generally accepted standard in the profession called the Double Lehman Formula.

Only 5% of smaller businesses are sold using a business broker. Many of the remaining 95% either price their businesses too high and have great difficulty selling (including a significant number that eventually simply close the business without ever selling), or the owners and their CPAs tend to place too low a valuation on the business. The quality of brokers varies greatly, so you should do some research to make sure you have a true professional who can enhance your sale price and negotiate the many paperwork pitfalls in completing a sale.

Most brokers are solo practitioners or with a low-end brokerage chain. Some of these solo practitioners are very good. One of the better associations of brokers is Business Brokerage Network (BBN). They are the only one with both national exposure for the upper end of small and mid-size businesses as well as having in-place quality controls for all brokers affiliating with their network.

The first task of the broker is to make an appraisal of what your business is worth. You should expect to supply three years of financial statements and general information about what you do. It is in your best interest to supply a one page "sales pitch" list of bullet items which tell a prospective buyer what makes you distinctive or special in your market.

Many brokers also do appraisals for divorce, estate, minority shareholder/partner, commercial dispute, and other purposes. If you need an appraisal, the engagement letter should state the fixed fee up front.

Many people ask us about the difference between a broker versus sale-by-owner. Selling your business yourself obviously saves you a large amount (the brokerage fee). You can advertise in the paper with a "blind" ad (one which does not state the name or too many details, and refers the reader to a post office box). You can tell your accountant or lawyer, and see if they know of anyone who might be interested. Sometimes you can find other business owners (even competitors) who might be interested in buying your business. However, you must be careful, since they can also spread the word in the community, which could cost you sales and employees.

Due to the difficulty of trying to find buyers, and the conflicting need to advertise versus the necessity of keeping it confidential, many owners find that retaining a business broker is usually worth the extra fee.