Not all brokers are created equal – there are some experts who represent their field with professionalism and many others who are less than competent. It is important to get to know your broker and his/her experience, communication style and strengths.
In short, you and your business broker should ‘fit’ as a team working toward the goal of selling your business at acceptable price and terms. Here are some steps you can take to make sure you are working with someone that will guide you through the process of selling your business:
1. Check the business broker’s experience and ask specific questions about their last few successful transactions.
Does the business broker tend to work with the buyer or seller? What went right and what went wrong during their last similar-sized transaction? Can you talk to his/her last business owner customer as a reference? How long has your business broker been selling businesses in the local area on a full-time basis? And don’t just look at the name of the brokerage company – many larger firms are successful based on the work of just a few agents. The rest of the agents tend to wash through an organization in less than a year.
2. Check the broker’s website and marketing collateral.
How are their brochure and website? If the business broker does not have a website, they are far behind the times. The internet has become the broker’s primary method of finding prospective buyers for your business. Is the site well written, attractive and easy to navigate or is a ‘do-it-yourself’ job? If a brokerage hasn’t invested in a decent website and professional brochures, they will not invest their own ongoing education or the advertising necessary to attract a buyer for your company.
3. Ask about the broker’s membership in professional business sales organizations.
Also check his/her state licenses as needed to market businesses for sale. A membership an appropriate local or national professional association means the broker was committed enough to this profession that he/she spent the time and money to maintain his membership. Having a real estate license is required in many states for business brokerage, and although important legally, it does not mean the broker’s focus is the sale of businesses. Do your homework to be sure the broker specializes in business sales and not residential or commercial real estate.
4. Agree on the listing price before you sign the marketing agreement.
Your broker should be able to explain the most customary valuation techniques for your industry and have data on comparative sales for your review. A good broker will give you an opinion of value before asking for a marketing agreement.
5. Don’t fall for the ‘broker tricks of the trade’.
If a broker tells you he/she has a buyer for your business without first really getting to know your firm, be wary. If a broker tells you he/she can get your asking price or more on after a brief meeting, be skeptical. And if a broker requires any upfront payment, be afraid.
Recommended Books on Selling Your Business and Finding the Right Business Broker:
- How to Buy and/or Sell a Small Business for Maximum Profit — A Step-by-Step Guide: With Companion CD-ROM
- Businesses For Sale: How to Buy or Sell a Small Business – A Guide for Business Buyers, Business Owners & Business Brokers
- The Complete Guide to Selling a Business
- 11 Things You Absolutely Need To Know About Selling Your Business
- Selling Your Business For Dummies
- Tips for Selling Your Business
- Loan Officer vs Mortgage Broker: Which Is Better?
- How to Become a Customs Broker
- 10 Steps in Selling Your Small Business
- How To Export Philippine Handicrafts and Export Procedures
Ryan Cave, MBA is managing director of Sunbelt Business Brokers of South Florida, a business brokerage firm specializing in the purchase and sale of small to midsized businesses. Sunbelt Business Brokers of South Florida has been involved in the valuation and sale of privately-held businesses for over ten years.