NABB – National Association of Business Brokers: Raising the Standard for Business Brokerage

Selling a business is different from selling almost any other asset.

For many business owners, the company they have built represents years—sometimes decades—of work, risk, sacrifice, relationships, and accumulated wealth. It may also represent a substantial portion of their retirement plan.

Yet when the time comes to sell, many owners have no idea how to choose the right professional to help them.

That is one of the reasons the National Association of Business Brokers (NABB) was established.

The National Association of Business Brokers is a professional organization focused on business brokers and intermediaries who help owners sell privately held businesses. NABB was created around a simple principle: business owners deserve to work with experienced, knowledgeable, active, and professional business brokers.

Business brokerage is a specialized profession. Selling a business requires an understanding of valuation, financial statements, marketing, confidentiality, negotiations, financing, due diligence, escrow, leases, licensing, and the countless issues that can develop between accepting an offer and actually closing a transaction.

NABB seeks to promote professionalism in that process and help business owners identify brokers who take the profession seriously.

What Is the National Association of Business Brokers?

The National Association of Business Brokers, commonly referred to as NABB, is an organization dedicated to promoting professionalism, experience, education, and ethical business practices within the business brokerage industry.

Business brokers serve as intermediaries between business owners who want to sell and individuals, companies, or investors interested in acquiring businesses.

At first glance, that job may sound relatively straightforward.

It isn’t.

A professional business broker may be responsible for:

• Helping determine a realistic market value for a business
• Recasting financial statements and calculating Seller’s Discretionary Earnings or EBITDA
• Developing an appropriate asking-price strategy
• Preparing a confidential marketing package
• Advertising the business without exposing its identity
• Requiring prospective buyers to execute confidentiality agreements
• Screening and qualifying prospective buyers
• Evaluating a buyer’s financial ability to complete an acquisition
• Coordinating acquisition financing
• Managing buyer questions and meetings
• Negotiating offers and deal structure
• Working through letters of intent and purchase agreements
• Coordinating due diligence
• Assisting with lease assignments or new leases
• Communicating with lenders, attorneys, CPAs, escrow officers, landlords, franchisors, and other professionals
• Helping keep a transaction moving toward closing
• Assisting with the transition of the business to its new owner

And throughout the entire process, the broker must help protect one thing that can be extremely important to the seller:

Confidentiality.

Employees, customers, competitors, vendors, and others may not know that a business is for sale. An uncontrolled disclosure can hurt morale, create uncertainty, and potentially damage the very business the owner is trying to sell.

That is why selecting a business broker should involve considerably more than choosing the first person who appears in a Google search.

Why Professional Standards Matter in Business Brokerage

There is an enormous difference between having permission to participate in a business sale and having the experience necessary to successfully manage one.

Selling a Business  can become complicated quickly.

A buyer may question the seller’s add-backs.

A lender may disagree with the asking price.

A landlord may refuse an assignment.

The buyer may request seller financing.

A key employee may need to remain with the business.

The seller may have customer concentration issues.

A corporation, LLC, franchise, liquor license, professional license, equipment lease, vehicle loan, inventory adjustment, or working-capital requirement may affect the transaction.

And those are only a few examples.

An experienced business broker has typically dealt with many of these situations before.

That experience matters.

The seller shouldn’t have to pay the price for a broker learning how to handle a complicated transaction for the first time.

Professional associations such as NABB exist in part to encourage brokers to continuously improve their skills, remain active in the marketplace, share knowledge, develop professional relationships, and maintain standards that benefit the people they represent.

What Makes a NABB Business Broker Different?

NABB was built around the idea that membership should represent more than simply paying annual dues and adding another logo to a website.

The organization has emphasized several characteristics that business owners should consider when evaluating a broker.

1. Experience in Business Brokerage

Business brokerage is learned through education, but it is also learned through transactions.

Every business is different.

Every seller is different.

Every buyer is different.

And almost every transaction seems to present an issue that didn’t exist in the transaction before it.

That is why experience matters.

NABB has emphasized meaningful, full-time business brokerage experience among its professional members. The objective is to create an organization of brokers who are actively working in the profession—not individuals who occasionally list a business in between unrelated transactions.

Experience helps a broker recognize problems before those problems become deal killers.

It also provides perspective.

An experienced broker has seen unrealistic buyers, unrealistic sellers, difficult landlords, complicated financial statements, financing problems, due-diligence disputes, licensing issues, renegotiations, and transactions that appeared dead only to ultimately close successfully.

There is simply no substitute for having been through the process.

2. Real-World Business Knowledge

Knowing how to sell a business requires understanding how businesses actually operate.

Revenue alone doesn’t determine value.

A buyer wants to understand profitability, cash flow, labor, cost of goods, customer concentration, competition, equipment, management, recurring revenue, owner involvement, growth potential, and risk.

A good business broker needs enough financial and operational knowledge to understand those factors and explain them to prospective buyers.

That is also why former business owners often bring valuable perspective to business brokerage.

Someone who has hired employees, made payroll, signed a commercial lease, purchased equipment, dealt with customers, managed vendors, paid taxes, and personally taken entrepreneurial risk understands things that cannot always be learned from a textbook.

NABB recognizes the importance of both education and meaningful business experience.

3. Active Participation in the Business-for-Sale Market

A business broker’s knowledge of the market should not be based on transactions completed many years ago.

The market changes.

Interest rates change.

SBA lending conditions change.

Buyer demand changes.

Industry multiples change.

Financing availability changes.

Certain industries become more desirable while others temporarily fall out of favor.

An active broker sees these changes in real time.

One of the concepts behind NABB membership has been that professional brokers should remain active in the marketplace with businesses currently offered for sale.

Why does that matter to a seller?

Because valuation isn’t only a mathematical exercise.

You can calculate Seller’s Discretionary Earnings to the penny and still arrive at the wrong asking price if you use an unrealistic multiple.

An active broker sees what buyers are responding to, what lenders are financing, where offers are being made, and why certain businesses sell while others remain on the market.

That marketplace feedback is extremely valuable.

4. Professionalism and Reputation

Business brokerage is a relationship business.

A broker regularly interacts with business owners, buyers, attorneys, accountants, lenders, landlords, escrow companies, franchisors, licensing agencies, and other brokers.

Reputation matters.

Professionalism matters.

Communication matters.

A business seller should look at a broker’s history, online reviews, testimonials, transaction experience, professional relationships, and reputation in the marketplace.

No association membership can guarantee the outcome of an individual transaction. However, participation in a professional association can demonstrate that a broker is invested in the profession and willing to associate his or her reputation with established professional standards.

That is what the NABB name is intended to represent.

Why Does Your Choice of Business Broker Matter?

Most business owners will sell a business only once or twice in their lifetime.

An experienced business broker may participate in dozens—or eventually hundreds—of transactions.

That difference in experience can be significant.

Consider just a few of the decisions a seller must make.

What Is My Business Worth?

The highest asking price isn’t necessarily the best asking price.

Overpricing a business can prevent serious buyers from pursuing it, make acquisition financing difficult, and cause a listing to become stale.

Underpricing obviously creates another problem: the seller may leave significant money on the table.

A professional business broker helps analyze financial performance, discretionary expenses, assets, market comparables, industry multiples, growth trends, risks, and other factors to develop a defensible valuation and pricing strategy.

How Do I Sell Without Everyone Finding Out?

Confidentiality is one of the biggest differences between selling real estate and selling a business.

Putting a FOR SALE sign in front of a business would be disastrous in many situations.

A business broker can advertise using a blind or confidential profile that provides enough information to generate interest without initially revealing the company’s identity.

Prospective buyers can then be screened and asked to sign a Non-Disclosure Agreement before sensitive information is released.

That controlled process helps protect the seller.

How Do I Know Whether a Buyer Is Serious?

An inquiry is not a buyer.

This is an important distinction.

Online business-for-sale marketplaces can generate dozens or even hundreds of inquiries. Some are serious. Many are not.

A competent business broker should attempt to determine whether a prospective buyer has the financial capacity, experience, motivation, and realistic expectations required to complete the transaction.

A seller’s time is valuable.

A seller should not spend hours meeting with people who have no realistic ability to purchase the business.

Can the Buyer Actually Finance the Deal?

One of the most important questions in a business sale is not simply:

“What is someone willing to offer?”

It is:

“Can that buyer actually close?”

Many small and lower-middle-market business acquisitions depend upon financing.

The structure of the deal, buyer’s equity injection, available collateral, business cash flow, Seller’s Discretionary Earnings, debt-service coverage, buyer experience, and lender requirements can all influence financing.

An experienced broker should understand that a $1 million offer that cannot be financed may be worth considerably less than a properly structured $900,000 offer from a qualified buyer who can close.

Closing matters.

NABB and the Importance of Continuing Professional Development

The business brokerage profession continues to evolve.

Technology has changed how businesses are marketed.

Online marketplaces have dramatically expanded the number of potential buyers who can discover an opportunity.

Digital financial records make due diligence faster.

SBA lending continues to play an important role in small-business acquisitions.

Data and transaction databases provide brokers with better valuation information.

Artificial intelligence is beginning to change research, marketing, document preparation, buyer communication, and financial analysis.

But technology does not eliminate the need for professional judgment.

In many ways, it makes judgment even more important.

A broker can generate marketing material faster today than ever before. That does not mean the broker knows how to value the business correctly.

Technology can generate a list of potential buyers. That does not mean those buyers are qualified.

Software can calculate SDE. It cannot automatically determine whether every proposed add-back is reasonable and defendable.

Artificial intelligence can summarize a purchase agreement. It does not replace the appropriate attorney.

Professional development helps brokers understand how to use new tools while continuing to develop the transaction experience and judgment required to advise clients effectively.

Organizations such as NABB can play an important role by encouraging brokers to learn from one another and continuously improve the quality of service delivered to business owners.

NABB President Pablo Fonseca and 1-800-Biz-Broker

Pablo Fonseca, founder of 1-800-Biz-Broker, serves as President of the National Association of Business Brokers.

Fonseca has been involved in business brokerage in Southern California since 2006 and has spent years working directly with entrepreneurs preparing to sell privately held businesses.

That experience has helped shape both the philosophy of NABB and the approach used at 1-800-Biz-Broker.

The philosophy is straightforward:

Business owners deserve experienced representation.

The process of selling a business should not begin with simply putting an advertisement online.

It should begin by understanding the business.

What does it earn?

What is it worth?

Who is the likely buyer?

Can the purchase be financed?

What issues could affect a transaction?

What needs to be improved before the business is taken to market?

How can confidentiality be protected?

How can the business be presented so that buyers understand its value?

And perhaps most importantly:

What does the seller actually want to accomplish?

For one owner, the goal may be maximizing the sale price.

For another, speed may be more important.

Some owners want to retire.

Others want to remain involved during a long transition.

Some want to sell to an individual entrepreneur.

Others would prefer a strategic buyer or competitor.

The broker’s job is not simply to “sell the listing.” It is to understand the seller’s objectives and structure a process designed to accomplish them.

How Should You Choose a Business Broker?

Whether or not the broker belongs to NABB, a business owner considering a sale should interview prospective brokers carefully.

Ask questions.

A few good questions include:

How long have you been selling businesses?

There is a meaningful difference between general business experience and actual transaction experience.

Is business brokerage your primary profession?

Your transaction shouldn’t be someone’s occasional side business.

How many businesses have you sold?

Completed transactions matter.

How many businesses are you currently representing?

This can help you determine whether the broker is active in the current market.

How will you determine the value of my business?

A broker should be able to explain the methodology—not simply provide a number.

How will you maintain confidentiality?

Ask when your business name, address, financial statements, and other sensitive information will be released.

How do you screen buyers?

Generating leads is easy. Qualifying them is considerably more important.

How will you market my business?

Find out which marketplaces, databases, broker networks, direct outreach, digital marketing, and other resources may be used.

Do you cooperate with other brokers?

Co-brokering can potentially expose a business to a larger qualified buyer pool.

What happens after we accept an offer?

A large portion of the broker’s work occurs after an offer is accepted. Ask how the broker handles due diligence, financing, escrow, landlord issues, and communication between the parties.

Can I see your reviews and references?

Past clients can tell you a great deal about what happens after the listing agreement is signed.

An Association Membership Should Be the Beginning of Your Evaluation

A NABB affiliation can be one indication that a broker takes business brokerage seriously.

But business owners should still perform their own due diligence.

Look at experience.

Look at completed transactions.

Look at reviews.

Look at current listings.

Look at the quality of the broker’s marketing.

Look at how well the broker understands your financial statements.

And pay attention to the questions the broker asks you.

A good broker should want to understand the business before asking you to sign a listing agreement.

Your broker may ultimately become one of the most important advisors involved in your exit.

Choose accordingly.

Thinking About Selling Your Business?

If you have been considering selling your business, you do not need to wait until you are ready to place it on the market to speak with a business broker.

In fact, earlier is often better.

Understanding your company’s approximate value today can help you decide whether to sell now, prepare the business for a future sale, reduce owner dependence, improve financial reporting, increase profitability, address customer concentration, secure a longer lease, or make other changes that could improve marketability.

At 1-800-Biz-Broker, we help business owners throughout Southern California understand their options and prepare for a confidential sale.

Our business brokers assist owners with:

• Business valuations
• Exit planning
• Confidential marketing
• Buyer screening and qualification
• SBA financing preparation
• Offer negotiations
• Due diligence
• Escrow and closing coordination
• Lease and landlord-related transaction issues
• Ownership transition

Our goal is not simply to find someone willing to buy your business.

Our goal is to help you structure a transaction that makes sense for you.

If you’re thinking about selling a business in Riverside, the Inland Empire, Orange County, San Diego County, Los Angeles County, or elsewhere in Southern California, contact 1-800-Biz-Broker for a confidential conversation and business valuation.

There is no obligation to sell.

Sometimes the most valuable first step is simply understanding what your business is worth and what you can do today to make it more valuable tomorrow.

Frequently Asked Questions About NABB and Business Brokers

What does NABB stand for?

NABB stands for the National Association of Business Brokers, a professional organization focused on business brokers and intermediaries who assist owners with the purchase and sale of privately held businesses.

What does a business broker do?

A business broker helps an owner prepare, value, confidentially market, negotiate, and ultimately sell a privately held business. The broker typically assists with buyer screening, financing, negotiations, due diligence, escrow, landlord coordination, and other aspects of the transaction.

Why should I hire an experienced business broker?

Selling a business involves substantially more than finding someone willing to make an offer. An experienced business broker can help with valuation, confidentiality, buyer qualification, financing, negotiations, due diligence, and the countless issues that can develop before closing.

Does NABB membership guarantee my business will sell?

No professional association can guarantee the sale of a business. Market conditions, price, financial performance, financing, industry, lease terms, buyer demand, and many other factors affect whether a transaction closes. Professional affiliation is one factor a seller can consider when evaluating a broker’s qualifications.

How do I find the best business broker for my business?

Interview multiple brokers and compare their transaction experience, current activity, reviews, valuation methodology, confidentiality procedures, buyer-screening process, marketing strategy, and knowledge of your local market and industry.

When should I contact a business broker?

Ideally, contact a broker before you need to sell. Even if your exit is one or two years away, an experienced business broker may be able to identify changes that can make your company more valuable, more financeable, and easier to sell.

Can 1-800-Biz-Broker help me determine what my business is worth?

Yes. Business owners considering a sale can contact 1-800-Biz-Broker for a confidential business valuation and discussion about their exit options. Understanding the likely market value of the company is often the best place to begin.

The National Association of Business Brokers – NABB is steps closer to launching its organization.

1. Trademark:  It is official, trademark rights have been approved by USPTO
2. The National Association of Business Brokers has launched their website www.BusinessBrorker.biz

The National Association of Business Brokers is an organization of professional business brokers who have been helping business owners buy and sell their businesses. Business Brokers are experts at helping entrepreneurs find a buyer for their business confidentially.

1-800-Biz-Broker and its principal Business Broker, Pablo Fonseca are proud to announce their support in establishing the professional business broker organization.

What will differentiate a NABB Business Broker from the other Business Broker Organizations?  Exclusive association…