Select a Business Broker – What to look for
Selecting a business broker is easy, selecting the right one should be another key element in your business sale strategy. Business brokers are usually highly experienced executives who have made a career out of selling other people’s businesses. When you have made up your mind to sell your business, your broker will help you go through every stage of the sale process by advising you and preparing the sale documents.
There can be many ways to find good business brokers. The Internet is the most obvious resource, using which you can look for business brokers in your area. Referrals from friends, partners and family members who have had an experience of selling their business are another important resource for finding a good business broker. You can also advertise your requirements for a broker online or through newspapers.
Remember, that it will be you who would be paying the brokerage fees, and your buyer will not share that burden with you. Apart from looking at the qualifications, certifications, experience, and client feedback of your potential broker, you should also pay close attention to the fee schedule and the terms and conditions of your contract agreement that you will be signing with your advisor. Get our The Seller’s Professional Advisors Beauty Parade Pack for more details.
Look at Broker Qualifications
Poor economic conditions have given rise to scams and misrepresentation. You should be doubly sure that the broker you are hiring has the right qualifications and has the legal permissions to represent you for business sale. You should ask any prospect brokers whether they are certified business intermediaries and hold the documents to that effect. A good broker would probably also be a member of International Business Brokers Association and/or other broker associations in different countries and industries.
Look at Broker Experience
Don’t hesitate to ask the business broker in detail about their previous experience and similar cases that they have handles in the past. Ask for references and verify the broker credentials with previous customers before you sign the contract.
Look at Broker Commitment
Even an outstanding business broker is worth nothing for you if that broker does not keep your sale at the top priority. The commitment can be determined by the amount of time a broker devotes to your case, and the amount of workload that a broker has. If a broker is already engaged in bigger deals, the chances are that you will be treated as a second-rate customer. On the other hand, a broker who is without a job might not be a great broker to hire. However, you should not accept anything less than 100 per cent when it comes to attention and commitment from the broker. Make your demand known to your prospect broker, so that your job is taken more seriously.
Look at Broker Fees
The broker fee is usually in the form of a percentage of the sale figure. However, brokers would almost always demand some expenses to be paid up front. While the standard commission is around 10 per cent, many brokers build a lot of hidden charges in their fee schedules, like document preparation fees, consultancy charges and the like. When your potential broker presents you the fee schedule, make sure you thrash every detail and leave nothing hidden in the small print.
Look at Broker Pricing Methods
A professional business broker will determine the price of your business and will guide you about the price that you should demand. You should know what methods your broker uses for estimating the price of your business. Scrutinise the broker’s past performance with a focus on the price demanded and the price realised for previous sales.
Look at Other Credentials
Every credible company has a website these days; your broker should have one too. The broker should be easily accessible and willing to help you with every detail of the sale. It is very important that you talk to business owners who have hired that same broker in the past. By working a little harder while hiring a business broker, you’ll be saving yourself a lot of hassle later. If the broker is incompetent or not committed, you run the risk of selling your business cheap or losing the sale altogether. Make sure that your broker hasn’t been sued and is under no current litigation by any buyer or seller.
Signing the Contract
Most of the brokers will want you to give them exclusive representation. Once you sign the agreement, you wouldn’t be able to engage any other party or broker for the sale of your business for a certain period. This period could be six months more. However, if you have a personal approach to some buyer or are already negotiating the sale with a partner or friend, you may include an exception in the contract in consultation with your broker. Make sure that the contract is concluded as the sale takes place, and there are no outstanding or long term liabilities against you.
Many brokers will also be willing to help you prepare the documents for a business sale without requiring you to sign up and get listed with them. They would complete your paperwork for a fixed charge, and you can decide to retain the later for the conclusion of the sale. It would really depend upon whether you have a buyer already interested. If you don’t have a clue about who will buy your business, it is advisable to go ahead with a seasoned broker.
Joanna Miller, Co-Founder of Business Wand, helps business owners navigate their way through the start to finish process of selling a business. Her specialty is helping owners understand how to prepare and make the most of their business sale process to maximise their company’s value. To understand how you can sell your business quickly for the highest sales price, purchase her book, “How To Sell A Business: The #1 guide to maximising your company value and achieving a quick business sale”