What Separates the Good Business Broker From the Bad?

Over the years, I’ve heard a million horror stories from business owners about their experiences with some of the “fly by night” business brokers out there. It’s always the same names and it always makes me wonder, “How did you get hooked up with these people? Why did you hire them?” I mean, I’ve seen some of their work and it’s TERRIBLE!

So, of course I feel bad for the business owner and I begin to question my ability to market my business brokerage services. If only I had been there first. If only these folks knew to call me or one of the other good credible brokers out there rather than the yahoo they ended up using. Yes, you heard me right; there are a lot of good credible business brokers out there. The problem is, there are a lot of bad, unqualified brokers out there as well. I’m in the business so it’s easy for me to tell the difference. But how can you, as the business owner, tell the difference?

Well, that’s a tough question to answer but I’ve been giving it some from thought and I’ve decided that the most important factors that separate the good business brokers from the bad are:

1. Ethics - most horror stories I hear are a result of a lack of ethics by the broker. This is unfortunate and disgraceful in my opinion. Unfortunately, there’s no easy way to test a broker’s ethics. My best recommendation is to make sure they’ve achieved their CBI (Certified Business Intermediary) designation from the IBBA (International Business Brokers Association). All CBI’s agree to adhere to the IBBA’s Standards of Professional Conduct and the Code of Ethics. I know acceptance of a code doesn’t guarantee anything, but it’s a good start. The second thing I would recommend is to check references. This can be tricky. Like any good job applicant, when you ask for references you will get handed the happiest and most satisfied clients that the broker is confident will put in a good word. So, to me this is a waste of time. Instead, why not call the other professionals in your area. It takes more than just the broker to do a deal. It’s takes an accountant and attorney as well. Call your accountant, have your friends call their accountants, same with your attorney and their attorneys. Not all accountants and attorneys will be close to the transaction marketplace (they tend to specialize) but they will ask around. Chances are they probably work with, know of, or went to school with another accountant or attorney that is involved in transactions. If you’re willing to put some time into checking credentials, sooner or later you will find your answers.

2. Candor / Honesty - Again, this can be difficult to judge for the untrained eye. But, what does your gut tell you? Are you receiving vague answers to your questions? Or, is the business broker you’re interviewing willing to sit down with you and answer every question that you have to the best of their ability, sometimes going above and beyond? If this is the case, usually it’s because they have nothing to hide. And, as a result, don’t have to tiptoe around your questions.

3. Pricing Ability - Being open, honest and ethical is only part of the game. It’s equally as important that the business broker be educated on matters of business valuation. One of the most important factors in selling a business is pricing it right. A mispriced business will either never sell (if overpriced) or fly off the market (if underpriced). Both situations are bad news for you as the business seller. If it’s overpriced it will sit on the market, get stigmatized and be difficult to sell even with a different broker. If it’s underpriced you will not maximize your retirement money. Make sure you ask the business broker you are interviewing if they know how to price a business. Moreover, make them prove it. Ask them to explain the three different approaches to value (Asset, Income and Market). If they don’t know what you’re talking about, RUN!! Ask for samples of the broker’s pricing analyses. Don’t settle for a broker that answers, “I can’t provide that it’s confidential”. Every broker can cleanse some samples and make them generic. Take them home. Review them, see if you would buy the business they present to you. Show it to your accountant and your attorney. Get their thoughts. If you’re not sure whether you’re looking at quality work or not, chances are your accountant or attorney will.

4. Marketing Ability - Remember at the end of the day, your small business is a non-marketable entity. You can’t go online, click a button and get rid of it. Someone has to actively create a market for your business. Ask the broker you are interviewing, “How do you plan to market my business?” Sit back and listen. If all they say is, “I’m going to post it on the internet,” RUN!! You can post it on the internet. For the fee the broker is taking, make sure they’re adding value. Dig deep on this subject. You won’t need to be a marketing guru to determine if the broker has a developed process that works.

5. Reputation - Part of investigating the reputation of the broker is requesting references. Not only client references but asking around for input and insight from other professionals about what business brokers they know and what they know about them. Also, go to the broker’s website; go to industry sites such as http://www.ibba.org. Look up the broker; see what other people are saying about them. Do the TV, newspaper, radio and trade publications value the broker’s opinion? It’s not easy to get quoted in articles, written about in papers, invited to be a guest on TV or radio shows. Professional media outlets do their homework. They can’t afford to put their name next to a non-credible source. A business broker that is taken serious and considered a credible source by mainstream media deserves consideration. Credibility is not bought, it is earned.

6. Courtesy / People Skills - Take the time to interview the broker in person. Never hire a business broker without meeting them. If they’re not willing to take the time to meet with you, chances are they won’t put much effort into selling your business either. Once they’re in front of you, see how they interact with you. Are they personable? Do you trust them? Are they friendly? Are they educated about your business and the business brokerage industry? Make no mistake, this is a people business. People buy from people they like. If you don’t like the person you’re interviewing, chances are neither will a potential buyer for your business.

7. Education / Experience - Business brokers are professional service providers, like accountants, attorney, financial planners, etc. Make sure the person you hire to sell your business (or help you buy one) continually invests in their own education and professional development. Would you hire an attorney that doesn’t keep up with current laws? Would you hire an account that isn’t updated on the tax code? Your business is the largest and most valuable asset that you own. Make sure the person you hire to turn it into cash is someone that stays current on industry trends, government regulations, new pricing methodologies, marketing strategies, etc. Business brokerage is a full time profession. If your broker doesn’t invest in their own professional development, chances are there’s someone else out there that does and will do a better job at selling your business for the highest possible price.

The suggestions above are not fool proof but, they will get you pointed in the right direction. Don’t take the sale of your business lightly. Make sure you do your homework. If you do, the wheat will quickly separate from the chaff.

Home Based Business Tax Benefits

Home Based Business tax saving strategies should be one of your primary business goals for a successful business. Working from home has many advantages and disadvantages but one primary benefit you can derive from your home based business is your tax saving benefits. If you have a home business, you need to be fully aware that you will have a variety of tax deductions that you can claim as benefits to help offset your business expenses.

Tax Benefits for home based business sole proprietors:

Before starting up a business, it is important to determine the most advantageous setup for your business by consulting a tax accountant or an attorney. Some of the benefits of establishing a business as a sole proprietorship are as follows.

Easier tax returns to file: Tax returns can be filed easier for a sole proprietorship because, generally, you don’t need to provide lengthy and complicated forms. Normally, you only need to fill out a short one or two page IRS form. Generally, these forms are simple enough that you can complete them yourself.

Free from mandatory audit: Filing your own taxes can you a lot of money if you don’t need to pay for an external audit or to hire an Accountant or Tax Consultant to file your taxes.

Dissolution of business: A Sole proprietorship may not have tax implications if you wish to dissolve your business if you don’t have a lot of business assets that you have accumulated.

You can personally manage your expenses and therefore, your deductions: As a business owner, you can determine your expenses and better manage your cash flow and payroll expenses. You can manage your finances and make expense adjustments that will benefit you through your tax write offs.

Healthcare for you as a business principal and your employees is a deductable expense. Normally, most Proprietors don’t realize that healthcare is a tax deduction and therefore fail to take advantage of this valuable benefit. You will need to check with your Accountant or Tax Consultant to find out the limitations on these deductions.

You will need to fully understand that no matter what type of business structure you form, you will need to report your income, profit and loses and other financial information on tax returns. An advantage with your home based business is that your business income counts towards your personal income and any loses that your business incurs may also be deductible to reduce your personal taxes as well.

Deductions and Claims:

Additional possible deductions for your Home Based Business include your business portion of your home expenses. To find out how much you can claim you need to calculate the amount of space you are using for your business. Suppose you are using 10% of your space for work, you can claim 10% of your heating expenses for the days for deduction. This results in major tax savings.

You may also be able to claim a percentage of the following expenses also. However, make sure to verify that they are deductible with an Accountant, Tax Consultant and/or with your local tax office.
• Mortgage
• Rent
• Telephone
• Electricity
• Internet
• Home insurance

Apart from the above expenses, you may also be able to deduct these additional indirect expenses incurred with regard to your business:

• Meals and entertainment for business related reasons
• Advertising Costs
• Business tools like computer, printer and paper

IRS Restrictions regarding these deductions:

To deduct expenses related to business you need to meet the following requirements.

• The business space should be used exclusively for the principal business activities.
• The space should be exclusive place where you meet your clients for business purposes.
• The space should be used for your personal use for doing normal daily business activities (i.e. phone calls, bookwork and etc.)

Home based businesses are great tax shelters. Though the expenses you incur in your home based business are tax deductible, the tax law varies from Country to Country and State to State. Therefore, you’ll need to find out from your local jurisdiction about the deductions which can you can legally claim for your specific business.

Own Your Business Or Your Business Owns You

To create a new business that makes money, and more significantly, employs others, and more significantly, gives a product to a customer that improves their life, is our greatest challenge, our greatest opportunity, and the greatest gift, far greater than any charity that we can give our fellow person. – Paul Zane Pilzer ; Economist, entrepreneur, and author

So you want to build a business that qualifies the picture painted on the quote by Paul Zane Pilzer and; gives yourself a sense of achievement, satisfaction time and financial freedom.

Before you go into the greatest opportunity, perhaps you should look at the greatest challenge first. According to statistic, most small business could not survive more than 5 years, the Office of Advocacy from The Small Business Administration has this statistic for 2007,

New Firms 637,100 Closures 560,300; Bankruptcies 28,322.

That works out to be a whooping 92% in one years on Failure vs New Start Ups. The reasons for such a high failure rate is obvious; many would be entrepreneurs rush into starting their own business without knowing much about the world of business. They tend to believe that with their experiences in corporate environment; the passion of becoming an Entrepreneur and perhaps arm with the new found knowledge from their business school;t they could taking charge of their time and make a different to their life and the life of others.

Success in business is never automatic nor guaranteed, it is a risky adventure. The reasons for small business failure can be many. But “entrepreneurs burnout” is seldom a reason for business failure, not many; Fail Entrepreneurs wanted to admit that he or she just throw in the tower. Soon after getting in and survive the elimination process of the fitters survive; reality started to creeps in and frustration building up even when the business is growing steadily. The reason is simple, in 2007, the Office of Advocacy of SBA estimated that there are 27.2 million business in the United States, 20.4 million of these businesses are without employees. A staggering 75% of all existing business are operated, managed and ran by the business owner themselves. They are the business owner, manager, operator, shop attendant, book keeper, delivery man or woman, you name it, they do it. It is not surprising that these entrepreneurs got burnout so easily and throw in the tower. They do not own a business, they own a job for themselves. That’s it.

So, if you are running a business of your own, ask yourself this question, “Am I Owning the Business or the Business Own Me?” The test, simply ask yourself this question, “Can the business run smoothly without you attending to it?” If the answer is positive, well, you might own a business and not owning a job. The next question is, For how long can you NOT attending to it?

If you are having this entrepreneurs burnout feeling or you haven’t own a business yet and intending to start one, a very good suggestion here is to visit some of the most established fast-food chain or franchise business; observe who are doing the day to day operation and running the business. You would probably  find a groups of perhaps, collage students and young adults and never know who is the real owner. That’s the beauty of real business leverage!

There is a vast opportunity in the business world and the benefits is far greater than the challenge, the truth is, are you owning the business or the business owns you?