Why Credentials Matter When Working with a Business Broker in Colorado

When it comes time to How to Sell a Business  and getting into the very process of it, most business owners will eventually turn their attention to the internet to locate a business broker or business intermediary. They will undoubtedly discover that there are scores to choose from. All tout their experience, past success, and promise to get the highest price for their clients. However, as in most industries its not easy to cut through the clutter of claims to zero in on which firm or individual is really the superstar you want. Be assured that when it comes to selling your most important asset you really want a superstar. If you were undergoing a major surgical procedure you would not choose a mediocre surgeon just as you would not want a less than qualified pilot in the cockpit for your next family vacation. The challenge in the world of selling businesses is that no governmental entity exists to certify and license a business broker for the services that they provide.

Most states, including Colorado, require a business broker to be a licensed real estate broker. Why is this you may ask? The reason is two-fold: the sale of a business many times includes a real estate component either via a real property sale or a lease negotiation. However, while the real estate portion of the sales process is important it is only one of scores of other proficiencies that will be required for a successful transaction. These include determining the listing price of the business, how to prepare, market, negotiate, conduct due-diligence, and manage the various aspects of the business sale. The other reason is that because business brokerage is a very narrow, almost hidden specialty, states just do not know where to put the industry in its umbrella of governmental oversight.

Business owners determined to realize the highest price for their business need to first make sense of which  brokers are likely to be at the top of their game and who follow the process to not only get the transaction completed but minimize (ideally eliminate) post-Closing risks. In addition to this post you may want to read 7 Traits of Outstanding Business Brokers here .

While there is no governmental regulatory agency for the industry, like most industries there are industry associations which exist not only as a resource for its members but for the customers and clients which is serves. Granted, these associations may appear to be self-serving but in fact they exist not only to promote their industry and members but to police its members to protect the public and the industry which it serves. Some industries offer its members the opportunity to be credentialed after passing rigorous educational requirements. In short, being a member of an industry association is simply a matter of payment to be associated. Being credentialed as evidenced by an industry designation is an entirely different matter.

The business brokerage industry as well as the mergers and acquisitions industry have strong associations which exist for the benefit of their members but more importantly for the clients for whom they serve.

The dominant association for business brokers is the International Business Brokers Association (IBBA.org). Members of this association must accept, embrace, and subscribe to a Code of Ethics (https://www.ibba.org/more-ibba/code-of-ethics/) as a condition of membership. It also offers the opportunity to earn the Certified Business Intermediary (CBI) designation for those brokers who have made the decision to seek ongoing education and professional mastery. Only 30% of the IBBA’s members have earned the CBI designation and less than 20% of Colorado business brokers have been awarded this prestigious designation.

Here is why business broker credentials matter especially in an unregulated industry:

  • Beyond subscribing to the industry Code of Ethics those earning the Certified Business Intermediary have dedicated themselves to the highest level of education in addition to at least 3 years of business brokerage experience.
  • These individuals possess a significantly longer tenure in the industry and have committed themselves to the education required to manage complex business valuations, high-level negotiations, contracts, and complex transactions on behalf of their clients – most of whom have no experience in selling a business.
  • Because they are highly active in the industry, they have keen insight into market trends, industry data, SBA financing, transaction management, and an understanding of the requirements of buyers searching for a business.
  • Because they are among the most successful of their peer group they also have direct access to members who have expertise across a wide variety of business and industry types from which to fill knowledge gaps necessary to understand unique value drivers that others may overlook.
  • They also tend to have established long term relationships with other professionals who will be critical not only to the transaction but also to the impact of the transaction from a tax and/or estate standpoint.

Industry credentials are only one indicator of the qualifications of a business broker. Brokers who have extensive business experience in their past and ideally those who have been in your shoes as a business owner also bring a unique skill set to strengthen their position as your most trusted advisor. Like with any professional relationship, you do not have to love your broker or need to spend your leisure time with them, but you will be well served in respecting their expertise, experience, communication skills, and ability to maintain focus on How to Sell your Business.

The process of researching and selecting a business broker should not be undertaken lightly. The business owner will be placing their largest asset in the hands of the broker and will be working closely with them for many months. My advice for business owners is simple: Choose wisely – your future and quite possibly the future of your family and their wellbeingis at stake.

Rocky Mountain Business Advisors is a business brokerage focused 100% on selling our clients’ business. As Business Brokers, we fathom it as our responsibility to apply a proven process to educate, prepare, and guide our clients through the sales process so that they can focus on managing their business while we focus on a successful sale. We bring a strong sense of urgency and tenacity to every engagement to realize the highest sales price in the shortest period of time. We bring buyers and sellers together. Contact us at 303- 474-5582https://rockymountainba.com/, or schedule a free 15-minute consultation to learn more about the services that makes us one of the best business brokers in Denver.