4 Tips How To Become A Business Broker To Be Successful

(doylc.com) How To Become A Business Broker - Business brokers, also known as intermediaries, are professionals who help others buy or sell private businesses. They typically take care of the entire process, from evaluating the business to applying to negotiating the right price with a buyer or seller. However, becoming an effective business broker requires an in-depth knowledge of all aspects of business valuation and operations. Realtors may also need to be certified with their state, depending on where they live. Use the steps below to become a business broker.

• Decide to become a business broker

Understand what a business broker does. A business broker is essentially a deal maker between buyers and sellers of businesses. They generally represent the seller of a business, but may also represent buyers, either party, or act as a neutral intermediary. Their goal is to make the selling process as easy and rewarding as possible for their customers. In particular, they take care of every aspect of the sale, including:

Look for business owners trying to sell.

Estimation of the fair market value of the company.

Create a sales list and promote the sale.

Identification and investigation of potential buyers.

negotiation of a purchase agreement.

Ensuring the buyer purchases adequate financing.

Other duties are required to complete a sale.

Know what the job requires. Business brokers must have the skills of accountants, financial analysts, salespeople and brokers, in addition to specific business brokerage skills. They must identify and, in many cases, cold call business owners who they think are looking to sell. As a new business broker, you must build relationships and deal with many rejections before even closing your first deal. There will be long hours and many repetitive tasks to complete before you make any progress. However, for those with an entrepreneurial spirit, being a business broker can be a rewarding career.

Look at the job market and pay. Business broker compensation varies between brokers and depends on the type of trades they do. Commissions from sales are typically 8 to 12 percent of the sale price, but can be more or less depending on the size of the business being sold. Business brokers can expect to make over $100,000 a year from just a small number of mid-sized deals. However, larger sales bring larger commissions. For example, a 10 percent commission on a $2 million sale could net you $200,000 (before costs) alone.

The market for business intermediaries depends on the economic situation and how many business intermediaries already exist in the region. The total number of brokers operating in the country ranges from as little as 2,500 to 5,000. This leaves ample opportunity for new brokers to enter the market.

Currently there are about 1,850 companies for each business mediation.

Be prepared to budget for your finances. Whilst the income potential from business brokerage is significant, there is always a chance that market factors or simple bad luck could limit your income for some time. Part of becoming a business broker or having any kind of commission-based job is accepting that you have to save most of your money just in case you don't get paid for a while. That is, once you start making good money, don't immediately go and spend it all on a new house, car, or other expensive item.

• Set up for success

Cultivate a business background. A business background is essential to success as a business broker as the job requires understanding every aspect of another business well enough to sell or buy that business on behalf of a client. Your experience will also help convince a client that you know what you are doing. Perhaps the most useful experience would be owning or operating a small business yourself. This can help you understand the mindset of small businesses and give you insight into how they work.

However, those with a corporate background may have a better understanding of larger companies, which can be useful in larger deals.

You don't need direct experience to become a business broker, especially if you join a brokerage firm that offers training. However, you still need a deep understanding of business processes and concepts to be successful.

Work on personal attributes that predict success as a business broker. To be successful, you will likely need sales talent, the ability to be diplomatic in difficult situations, and an absolute determination to work hard and independently on your own schedule without getting lazy. You should develop a knack for building relationships with potential buyers or sellers and quickly develop a deep understanding of their business and industry. This includes scouting for all possible leads to ensure you don't miss out on potential buyers. You also need strong negotiation skills and the ability to keep the buyer or seller on track and have confidence in the deal.

Investigate training opportunities. Several business broker training alternatives are available for individuals who wish to enter the profession. Try searching online for "Business Broker Training". For example, the American Business Brokers Association offers two-day training programs for aspiring brokers nationwide. If you choose a third-party option, be sure to look for reviews from previous students so you know the training program is reputable. You should look for training programs that offer after-class support, preferably free of charge.

Learn the skills required. Regardless of their background, most individuals require specific training for business mediation. There are many skills that must be learned through training, experience in other fields of work, or experience in direct business placement. Just some of them are:

How to redesign financial statements for discretionary cash flows?

How to apply the most appropriate business valuation method?

How to create a marketing package for any type of business?

How to maintain strict confidentiality in national marketing?

How to choose the most suitable advertising spaces for marketing a company?

How to conduct the first meeting between buyer and seller without generating hostility?

What are the do's and don'ts of successful price and condition negotiations?

How do I get the transaction to the closing table?

Closing the transaction with proper documentation and tracking?

• Working as a business broker

Apply to an existing brokerage firm. The best way to gain experience as a corporate recruiter is to apply to an existing corporate recruiter. Earning a reduced commission is worth the amount of mentoring and training you get from working with experienced brokers. It will also be easier to find leads if you work for an established company. Just make sure the agent is willing to actually train you, rather than just giving you a list of contacts and expecting you to make a sale.

Join a different kind of office. Many business brokers work with those in other areas and affiliate with their offices to process any business deals that may be made. For example, many agents work with real estate agents, accountants, or bookkeepers and can handle any potential business sales that the others learn about when dealing with local businesses. Working in this type of environment can earn you easy referrals and also give you the experience you need to get your broker license.

Get a license in your state. In 17 states, business brokers must be licensed as real estate agents. You also need a real estate sales license if you are dealing with the sale of real estate as part of your business brokerage (in all states). To get the sales license, all you have to do is go through the required courses and pass the license exam. From here you can gain more experience and then repeat the process to advance to a broker license.

The exact requirements for each level and the corresponding coursework vary by state. Check with your state's real estate department for current requirements.

You will also likely need to pass a background check before getting any of the licenses.

Become a certified broker. Experienced and educated business brokers can increase their reputation by earning certifications in this field. Specifically, the American Business Brokers Association (ABBA) may award qualified brokers the Accredited Business Intermediary (ABI) designation. Similarly, the International Business Brokers Association (IBBA) offers the Certified Business Intermediary (CBI) designation. Acquiring either of these two requires applying to the appropriate organization and paying a fee.

California and Texas also have state-specific organizations that offer credentials to their members.

Start your own practice. Your other way of becoming a business broker is by opening your own shop. Working as a sole practitioner can be very cost effective as it allows you to work from home and avoid unnecessary expenses. However, working from home and working alone can make it difficult to focus. In addition, you are missing out on the mentoring and training offered by existing brokerage firms.

Keep in mind that you'll need some working capital to keep the lights on until you start closing deals.

• Find success

Build your relationships. Chances are you won't have much success in the beginning. Most of your cold calls go nowhere, your few leads may not turn into actual deals, and you may appear invisible to salespeople. You spend money on advertising, transportation, and your own way without earning a paycheck. However, over time you will find that if you work long and hard enough, deals will happen. All it takes is building relationships and referrals to get the green light on a deal. Make sure you understand from the start that it can take up to six months before you actually see placement work.

Go all out on every deal. When you finally close a brokerage deal, focus all your efforts on understanding every aspect of this business. Meet the employees, learn to use their devices, dig deep in their books and work to know their market and competitors better than they do. Instill confidence in your client that you are capable of successfully representing their business by showing a genuine interest and understanding of what they are doing. If you work hard enough, your efforts will earn you a good sale price for the business, which in turn will earn you a higher commission.

Respect your customers. Customers can have a range of issues with their businesses, from poor bookkeeping to disorganized operations. However, it's not your job to judge what they're doing wrong, it's to prepare your business for sale. To do this, you need to be respectful and polite while working to understand his business and, for example, organizing his accounting in a way that potential buyers can better understand.

Work on specializing. As in all industries, specialization is a proven way to build reputation and get referrals. Business brokers who specialize in a specific industry can gain a reputation as industry experts and become a go-to place for specific types of deals. Your specialty might be something like retail, restaurants, or technology companies. This specialty can come either from your previous experience or from completing a number of deals in this industry.

If you are drawn to a particular segment of the industry or specialization, you should consider continuing your education or training in it. This will make you more qualified to offer specialized services in this field.