Savvy business sellers know that a good business broker brings experience and expertise to the sale process, significantly improving the seller's ability to attract prospects, overcome hurdles, and negotiate and close the deal.
Finding a business broker is easy. But finding the broker that is right for your sale can be a little more challenging. In addition to making sure that the broker has a solid track record in your industry, you'll want to find a broker that is aligned with your goals and expectations.
Finding the Right Business Broker
After you have decided to sell your company, it's helpful to meet with multiple brokers to identify the one that is the best match for your unique needs and sale objectives. You have spent years building your business. You owe it to yourself to interview a number of candidates. As you go through this process, keep the following questions in mind when comparing brokers:
1. What are the broker's background and credentials?
Right off the bat, it's important to establish the broker candidate's qualifications and credentials. Look for brokers who are committed to the education and credentialing offered by the International Business Brokers Association (IBBA) or other state broker associations. A broker who has obtained the IBBA's CBI (Certified Business Intermediary) designation has met the educational requirements and high ethical standards of the IBBA.
The broker should also have a track record of successful business sales in your industry. If the broker's experience is concentrated in another industry or vertical, he (or she) may not have the contacts or information it takes to adequately represent your business.
2. Is the broker genuinely interested in learning about your business?
The best brokers take time to learn why their clients are selling their companies and what they hope to achieve from the sale. Without this information, it's impossible for the broker to negotiate a deal that accommodates your desired financial and non-financial outcomes.
Likewise, broker candidates need to demonstrate an interest in learning as much as they can about your business during the initial meeting. By gaining insights about the mechanics of your company, the broker will be in a better position to market your business to the right prospects. Most importantly, don't lose sight of the fact that a good broker first and foremost represents your interests over the interests of the buyer.
3. How will the broker promote your sale?
It's not enough for broker candidates to promise they will attract the interest of qualified buyers. Instead, you should expect to hear details about the strategy the broker will use to advertise and market your sale, as well as the steps the broker will take to maintain confidentiality.
Marketing your sale through online business-for-sale marketplace like BizBuySell.com is a strong first step. However, the best brokers should also describe a comprehensive promotional strategy that incorporates other online and offline tactics. Your broker should also be a well-respected and trusted adviser in your community and be well-connected with good relationships with accountants, lawyers, bankers and other small business professionals.
4. What process will the broker use to screen prospects?
There are a lot of reasons why you don't want to personally meet every individual that expresses interest in your company. An endless parade of prospect meetings wastes your time and could breach confidentiality, unleashing a wave of rumors among your customers, suppliers and employees.
A big part of the broker's job involves screening prospects to separate the tire-kickers from the serious buyers. Good brokers have an established screening process and usually meet with potential buyers for several hours before allowing them to proceed further down the sale path.
5. How many listings is the broker currently managing?
It's not unreasonable to expect broker candidates to reveal how many other listings they are currently managing. If the broker is representing too few listings, it could be a sign that they aren't experienced, motivated or capable; if they represent too many, you run the risk that your sale may not receive the attention it deserves.
It is not unusual for business brokers to carry 15-20 business listings at any given time. Over the course of any given year, a good broker may sell 10 or more businesses, so it's also worthwhile to ask about the number of companies the broker sold last year as a way to gauge his selling abilities and focus on business brokerage. Some commercial real estate brokers and even some residential brokers dabble in selling businesses so its up to you as the owner to make sure your choice of representation specializes in the valuation and sale of small businesses rather than properties in general.
Finally, it's important to evaluate whether or not there is a trust between you and the broker candidate. The relationship you have with your broker is more than a business arrangement--it's a partnership that will ultimately impact your ability to achieve your sale goals. To improve the odds of a successful sale, look for brokers that listen to what you have to say, but aren't afraid to be honest with you about the realities of the sale process.