So I got this question yesterday:
I have decided to sell my successful business. I am leaning towards selling it on my own. I see all these websites available to list businesses and my inquiries to my accountant and attorney have not been favorable about business brokers. What do you think?
Answer: For over the last 15 years I have been helping people buy and sell companies and often times get clients on the rebound from having bought or sold with another broker.
I appreciate the comments you received from your attorney and CPA, I am not certain that they really know the full extent of what is involved in a business sale. I have always felt that even if the broker does less than a brilliant job, at the very least I can let them handle all of the running, organizing of the documents, being a buffer or messenger on difficult issues and above all, I can remain focused on running my business while they deal with inquiries. I am sure, however, they too have seen less than competent brokers but no one should cast dispersions on an entire group because of the failings of the few.
Unfortunately, like any other profession, there are good and bad business brokers. I have heard plenty of stories from sellers that simply felt the broker did “nothing” and then begrudged or disputed the commission. This is true in any field and so it is ultra important that if you truly want to get value from your broker relationship to engage one who you feel will go above and beyond the norm to make a deal happen. A few things you will want to know are:
How are they planning to promote the business? Will they just put up ads on the Internet? (you can do that)
How will they package the business? How detailed will the profile be that they will write up for prospective buyers (be realistic in that a small restaurant will not necessitate a 30-page Offering Memorandum)
What is the nature of their relationship with you? Is it a fiduciary duty? Are they strictly acting in a transactional capacity? Who do they really represent, if anyone? You need to clarify this early on so there’s no mistaking to whom their allegiance, legal or otherwise, belongs.
What will they do to bring you qualified prospects?
What process do they go through to conduct their valuation?
Are they successful? How Long have the been in the business? How many deals have they done? Are they full time? What are their skills with technology?
How many business listings do they carry?
Did they come equipped to the meeting with a list of referrals for you to contact?
Two small things I have found to be a good test at the first meeting are:
Do they really dig down to learn your business, asking you a lot of solid, probing questions, or do they just push for a listing?
Give them a task or two to follow up and see how quickly they respond after the meeting (one thing can be to get a list of referrals or a sample profile they’ve done).
All of this aside, there are no hard rules for whether or not to engage a business broker. I personally feel that the right business broker can be a huge asset and when they do their job right, you will pay them their commission and thank them because they’ll have earned every cent. Just be certain you hire the right one.