Some choose to go it alone and hire in professionals to tie up the legal details when they’ve found a buyer, but many opt for the safer option from the outset: a business broker.
Finding an appropriate buyer in a competitive market is no mean feat and then there are the other key aspects of a sale including valuation, marketing, negotiation and financing.
A good broker can help you negotiate all these hurdles so it’s worth searching for a reputable one.
Here are the key attributes to look for in a business broker:
Qualifications and experience
The first thing you should be looking for in a broker is evidence that they’ve had the right kind of training to support the service they are offering.
In the UK, there are no formal licensing requirements but look for an MBA qualification as well as some decent financing and accounting training and experience.
A broker needs to be able to analyse P&Ls, balance sheets and tax returns at a glance – so make sure you are convinced they are up to the job.
It’s also worth finding out a little about their track record. Seasoned broker, Cameron Ryan from Boyd Ryan Business Sales and Consultants agrees:
‘A broker should be able to talk you through the details of other transactions they have successfully facilitated over the last 12-24 months. This will give you an idea of just how successful they have been.’ he says
He also suggests that, in doing this, you will be able to see how involved the broker was in each transaction.
‘Make sure the broker didn’t just do an inspection, get an offer and hand it over to the solicitors to sort the rest out.’ - Cameron Ryan from Boyd Ryan Business Sales and Consultants
An ethical approach
As you may imagine, the world of business brokerage has its fair share of opportunism and poor service. What you should be looking for when you meet your broker is a clear demonstration of professionalism and integrity.
‘From the first point of contact, the broker should be interested in two things – gaining a thorough understanding of your business, and offering you a comprehensive outline of the sale process.’ says Cameron
You need to be assured that a sales strategy will be tailored to you and your particular business,
‘Be wary of any broker that doesn’t take the time to gain an understanding of your business before talking about fees and contracts…and anyone who seems like a car salesman or real estate agent. Selling a business requires a unique set of skills and is a lot more complex than just selling a car or a house.’
Mark Jason, Managing Director at LINK business brokers reiterates this point:
‘A good broker will listen to and understand the sellers requirements and objectives as well as being competent at completing a comprehensive and independent valuation of the business.’
Alarm bells should ring if a broker tells you your business is worth more than you genuinely think it is, or if they want a larger than average upfront fee:
‘Some brokers may try to charge a large upfront payment, on the back of various promises – an inflated sale price or some glossy advertisements in a magazine that in reality no one actually reads.’ says Cameron
Some form of upfront fee can be expected, but this will depend on the size and value of the business and a success fee will also be charged after the sale.
‘The broker should have absolutely no troubles outlining his fees to If you think they seem high, ask the broker why. A good broker should have no problems justifying his fees. And a decent broker will be able to negotiate on his fees with the client so that both parties are happy – if he can’t negotiate a decent fee for himself, then what hope has he got negotiating a good sale price for you, his client?’
And always ask if the broker has any testimonials from previous satisfied clients. Any broker worth their salt will gather a few of these and have them at hand to reassure you.
A tailored sales strategy
A good broker will draw up a unique sales strategy that caters to the characteristics of your particular business as well as expectations in terms of price and timing.
They should be able to suggest a number of advertising and marketing strategies, both online and offline, that would fit with the size of your business and the industry it’s in:
‘Your broker should be able to outline how they will present your business to the marketplace and provide an example of the type of Information Memorandum they intend to produce for your business. This document is a good reflection of the broker’s competence, skills, attention to detail and understanding of businesses in general.’ says Cameron.
It’s also worth asking your broker how they will sustain confidentiality. The last thing you want is news of the sale being leaked before you’ve mentioned it to existing staff and customers. Mark Jason says:
‘It’s important to have someone on the seller’s side who knows how to qualify a buyer and who is only providing their business information to the right people. Brokers must protect sensitive business information that may have been requested by prospective buyers, until such a time as it is deemed appropriate within the sales process.’
And make sure your broker intends to stick with you until the sale is made. Many brokers will just advertise your business online and leave you to generate your own meetings. Some feel their job is done when an offer has been accepted from a buyer. A good broker should offer their guidance right up to the point of completion.
If your broker is liked and respected by their peers, they are more likely to get a good deal for you and it’s always a good sign if they are members of the International Business Brokers Association (IBBA).
When it comes to financing the deal, most sellers would rather not be involved, so a broker should have access to finance experts who can advise the qualified buyer.
Another key attribute of a good broker is an extensive buyer database. If a broker has limited buyer contacts, they may end up approaching your direct competitors, the sensitivities of which are obvious. Knowledge of a range of complementary trade buyers and investors is a great asset to a business broker.
Managing these connections takes some skill:
‘Buyers come from a multitude of different places and the costs associated with advertising, as well as the time needed to sift through the plethora of enquiries, needs to be handled by someone who understands the process properly and has the seller’s best interests in mind.’ says Cameron.
It’s also worth finding out how many listings your broker is currently handing: too little could indicate poor motivation or a lack of experience. On the other hand, if they have a huge client base, there’s a risk your sale won’t get the attention it deserves.
‘Do you want to sign with a broker who has 100 listings of which he can in reality sell 3, or with a broker who has 20 listings of which he can sell 18?’ asks Cameron.
Finding a decent broker will take a little time and research, but it’s worth the effort. What’s a little legwork compared to months sitting on the shelf?
Are you interested in hiring a good broker to sell your business? Find one here at BusinessesForSale.com