Preparing to Sell Your Business Part 2

Utilizing a Business Broker

Now that you're prepared to sell your business, your next decision, is whether to use a business broker or not.

Here are a few questions to ask when visiting with business brokers.

• Please tell me about you and your firm?
• How will you market my business?
• Do you cooperate with other business brokers?
• Will you display my business on business brokerage Internet sites?
• Can you provide references?
• How will you value my business?
• May I have a sample copy of your listing agreement?
• Are you affiliated with any business brokerage associations or trade groups?

Business brokers should be able to bring you prospective buyers that you would not be able to get on your own. Most brokers will ask for at least a one-year exclusive listing agreement. This means that any disposition of the business will entitle the brokerage firm to their fee. Commission rates will normally vary between 10 to 12 percent, but they are, by law, negotiable. Many firms also have a minimum fee for small businesses. Some may ask for a small retainer or up-front fee or advertising costs.

Usually, the smaller the transaction, the larger the commission. "Main Street" businesses, those with enterprise value between $100,000 and $1,000,000 can expect commissions to average between 10% - 12%. Commissions are determined between the client (seller or buyer) and their broker and are normally paid at closing. The larger middle market transactions use the Double Lehman scale.

The Double Lehman Scale is calculated as follows:

DOUBLE LEHMAN SCALE
Up to US $1,000,000	10%
$1,000,000 to US $2,000,000	8%
$2,000,000 to US $3,000,000	6%
$3,000,000 to US $4,000,000	4%
$4,000,000 and up	2%

A good business broker will assist you throughout the remainder of the process outlined below. For additional information contact Ron Schwab at 530 269-1143 or go to http://www.ronschwab.com/ .