Tips for Hiring a Business Broker
If you’ve decided to sell your small business, a broker can greatly improve the process.
If you’ve decided to sell your small business, a broker can greatly improve the process. The right broker can maximize sale price and ensure you get the most favorable possible deal terms. The wrong broker can slow the sale process and do nothing but drain money from your bottom line. The following strategies can help you select a broker with the right experience and skills to sell your business:
Know the Characteristics of an Excellent Broker
Don’t hire the first broker you find who has a sales pitch. Anyone can market themselves as a broker. You need someone who truly has the skills necessary to sell your business. The key attributes to seek include:
- Niche experience. Find a broker who specializes in working with businesses like yours. Even the best brokers may struggle when they have little familiarity with a specific industry.
- A provable record of success. The best brokers are willing and even eager to provide references. Those references should be able to cite specific experience, and to highlight what exactly the broker did to help the transaction succeed.
- Networking capability. Skilled brokers have plenty of connections they can use to find buyers and connect you to other resources, such as M&A accountants. Don’t trust a broker whom no one knows, or who says they can do it all on their own.
- Honesty. Unreasonable price expectations are a common barrier to successful sales. Good brokers are honest with their clients about pricing issues, even when doing so means telling the client something the client may not relish hearing. The broker should be able to tell you the specific criteria that factor into valuation decisions, and justify their valuation with data, not wishful thinking.
Where to Find Your Broker
Finding an exceptional broker begins with your personal network. Ask people you trust for local referrals. If you don’t know anyone who has sold a business, look to see who is listing businesses in your area—or even ask the owner of a recently sold business you respect whom they recommend. Some other useful sources for referrals include:
- Financial and legal experts. Your lawyer or accountant probably know several brokers, and may have even navigated other sales. Ask them who is doing an excellent job.
- Online directories. Proceed with caution here, since not all directories are reliable and many will list any broker who pays a listing fee. With a little research, however, these directories are a great starting point.
- Local business development organizations. Your Economic Development Office or Chamber of Commerce may be able to refer you to someone great. When you contact them, frame the discussion in general terms to avoid violating confidentiality and potentially alerting a competitor to your intention to sell.
- The International Business Brokers Association. The IBBA is the leading trade organization for business brokers, and is committed to excellent standards. Members are skilled brokers with a track record. Look for those who are IBBA certified and who also are Certified Business Intermediaries. These experts have significant training, expertise, and skill, and have demonstrated a commitment to continually sharpening their skills.