With all this at stake, you need to make sure you entrust the sale of your business to the right person and choosing a good business broker will be key to achieving a successful sale.
The relationship between a seller and their broker is more than a business connection – it should be a partnership. So, when searching for a broker, make sure you have the following 10 points on your checklist:
1. Great qualifications
The first thing to look for when shopping for a broker is if they’ve had the right type of training to support the service they are providing.
Whilst there are no formal licensing requirements in the UK, the accreditation of CBI (Certified Business Intermediary) can be obtained by studying through the International Business Brokers Association.
An MBA degree would be desirable, and some type of finance and accounting training is essential to understand P&Ls, balance sheets and tax returns.
2. Clear ethics
From the outset, a seller should expect a demonstration of integrity and professionalism. A good, solid broker will show a genuine interest in your business and will offer a thorough breakdown of the sale process, as well as a strategy tailored to you.
Look for someone who takes time to familiarize themselves with your aims and expectations of the sale and who is calm and listens, rather than talking at you.
And beware of any ‘broker’ who seems more interested in promoting their valuation services than selling your business.
3. Sales strategy
A decent broker will draw up a sales strategy specific to the nuances of your particular business along with the price and timing expectations. The plan should include advertising and marketing as well as how they plan to sustain confidentiality. The last thing you want is news of the sale being leaked before you’ve had a chance to tell employees and customers.
Expect guidance as to how you can market your sale online as well as offline tactics and an example of the type of information memorandum they intend to produce for your business. This document will reveal how competent your broker is in terms of attention to detail.
Your broker should be able to provide evidence of other transactions they have facilitated over the last two years. This will give you an idea of just how successful the broker has been and also give you an insight into how intimately they know each transaction they were involved in: i.e. not just conducting an inspection, getting an offer and handing it over to a solicitor to sort the rest out.
It would also be a good sign if your broker had owned or operated a business in the past – then you will know they understand the sales process from a personal perspective.
It’s critical that your chosen broker is with you all the way, right down to receiving the sale proceeds in your bank account. Many intermediaries don’t stick around but simply advertise on the web and leave you to generate your own meetings.
And some brokers think their involvement is over once you have accepted an offer from a potential buyer. Failure to complete, especially towards the end of the process, is devastating for a seller and expensive in terms of lost money and time.
6. Solid customer base
It’s perfectly acceptable to ask a business broker how many listings they are currently handling. If that list looks small, this could indicate a lack of experience or motivation.
Conversely, if they seem to have a very large number of clients, there’s a chance your sale might not receive the attention it deserves.
A broker that’s carrying around 15 to 20 listings is about right.
Your broker should be well connected in the local community and have strong relationships with lawyers, accountants, bankers and other business professionals.
In terms of financing the purchase, most sellers don’t want to carry any of that load – so a broker should be able to introduce you to professionals who can finance the deal for a qualified buyer.
A broker who is liked and respected by their peers will be more likely to get a good result for you and being recognized by the IBBA is a good sign.
8. Justification for fees
An honest broker should have no qualms about outlining fees. The charge generally includes a retainer and a ‘success fee’.
They should also have no problem with justifying their costs if you feel they are a little high. Make sure you are satisfied with their breakdown.
Any broker that wants to charge a large upfront payment on the back of promises such as an inflated sales price or unnecessarily expensive advertising are not to be trusted.
And good brokers are always willing negotiate so that both parties are happy.
9. Existing testimonials
Always ask if there are testimonials available from previous happy clients.
A broker worth their salt will accrue a few of these and have them at the ready to reassure you.
10. Extensive buyer database
Many brokers will have limited research capabilities and may end up approaching direct competitors to your business. Apart from the sensitivity this causes in a commercial sense, it also overlooks the numerous complementary trade buyers and financial investors that may be actively seeking to acquire a business like yours.
By Nicky Tatley, Chief Writer at BusinessesForSale.com, the market-leading directory of business opportunities from Dynamis. Nicky writes for titles across the Dynamis stable, as well as a number of other industry publications, both print and online.