How to choose the right business broker to help sell your business

Why use a business broker?

 

If I were to ask why you bother using an accountant what would you say? You can do simple math, so why not do it yourself?

 

You might come back with one of two responses:

 

  1. “It saves time so I can concentrate on running my own business.”

 

OR

 

  1. “They can (and do) save me money.”

 

WHY?

 

They are the experts in that field. They went to university then spent years training in accountancy just so they can save you money.

 

The fee you pay an accountant should really be looked upon as an investment rather than an expense.

 

In short the answer as to why you might enlist the help of a business broker to help buy or sell your business is rather similar to that of an accountant.

 

If you are planning on buying or selling a business does it not make sense to hire a seasoned professional with a specific skill set, someone who eats, sleeps and wakes in the world of mergers and acquisition, someone who can potentially increase the value of your business to 71% or higher?

 

We think so too (I’m assuming you said yes to that last question).

 

In this guide we are going to let you know exactly what you should be looking for when selecting a business broker to act on your behalf, but before we do, let’s look at exactly what a business broker is and what he / she does.

 

What is a business broker?

 

A business broker is a person or company that helps when it comes to the sale or a purchase of a company. A business broker can be with you for the journey – right from the exit plan, all the way through the due diligence (see our last post if you’d like a little help with your due diligence. click here) to finding the right buyer, negotiating the best price and eventually closing the deal.

 

Like accountants, some business brokers are better than others. However, unlike accountants there is no set qualification one must achieve to be a broker, consequently there is no regulatory body or ombudsman you can go to if your business broker underperforms and does not do the job they promised.

 

Companies and individuals operating as business brokers may also operate under the following titles or companies:

 

Business Transfer Agents

Business Brokers

Corporate Finance Firms

M and A advisors

Investment Banks

Commercial Real Estates

 

 

There are subtle differences between the services offered by the above and in the case of corporate finance firms, some of them don’t deal in business sale or acquisition at all, they operate more as a commercial loan company.

 

Confused? Great, that’s why we are here – to clear the muddy waters and help you make an informed choice.

 

Who should use a business broker and who should not?

 

It is universally agreed that the size of the business should inform the decision as to whether or not a business broker (and their associated fees) will represent a significant investment when it comes to selling your business or purchasing a new one.

 

Small ‘one person’ enterprises are unlikely to benefit from the input of a business broker. If this is you and you are embarking upon this journey alone then please read our free advice in the blog section of our website at We sell any company.com. There are some useful tips along with advice from industry professionals you will find most useful.

 

Can’t I simply Google ‘top business’ brokers and select the one at the top?

 

If only life were that simple. In relation to paid ads (the first listings you see on Google) they say nothing to the quality of service you will receive. In fact Google will give that top paid spot to the company that gives them the most money.

 

Having said this however, Google aren’t market leaders for nothing. Their bidding system incentivizes well performing relevant websites to use paid for ads by lowering their cost per click. More relevant companies can still take the top spot if they pay enough for it.

 

Can I trust a business broker’s sales pitch?

 

In our experience it is wise to take claims made by a business broker with a pinch of salt. They are often unverifiable but do beware of over the top hyperbole:

 

WE SELL 80 – 100% OF OUR CLIENT’S BUSINESSES AND DOUBLE THEIR SALE PRICE!!

 

 

Actually, on average many business brokers only sell about 20% of the businesses that they take on, and many sell much less. This is why it is integral that you choose the right broker for your business.

 

Look out for anonymous testimonials on the brokers website

 

If a broker is genuinely doing a good job then their testimonials must at least appear to be genuine. By that I mean they have an actual name / company name to accompany the testimonial.

 

“X business broker was amazing and helped me get a sale in just three hours”

 

Bob.

 

… simply isn’t going to work and should raise a red flag.

 

If the testimonials appear to be real, then there’s nothing stopping you following up with a phone call to the company or individual cited on the testimonial.

 

You can also ask the broker for a list of their clients. Whether or not they willingly give you that list is another matter entirely.

 

Look for an industry specific broker

 

There are brokers that specialise in specific sectors and will only deal with companies in that sector. As we have mentioned accountants earlier let’s take them as an example:

 

If you have an accountancy firm for sale then there is a certain degree of comfort to be gained by enlisting the help of an accountancy broker who has a proven track record in successfully negotiating successful sales and purchases of accountancy firms. The chances are they know that sector very well and their chances of securing you a good deal in a faster time are increased.

 

How much should I pay for a business broker?

 

This depends entirely upon the broker and exactly what they are going to do for you. What is often not highlighted however is that the fees charged are often negotiable. I would take you back to the point raised near the start of this post and say the size of the company and the price you are expecting for your business will instruct how much you will pay.

 

In any event make sure the broker gives you their fee structure and outlines exactly what you are paying for. The contract you receive should be in line with the structure you have agreed to. Make sure it is before signing.

 

Get the name of the broker handling your business sale

 

Some companies will employ a skilled sales team who will tell you that you have your own account handler who you can call any time – just so you will agree to work with them.

 

If this is the case make sure it’s not some poor individual in a call centre by asking for the name of the person together with contact information.

 

You should also have them outline exactly what they will be doing for you and how exactly they will keep you informed of their progress and how often.

 

Do brokers do business valuation?

 

Many do, the idea being that their ‘real world’ experience places them in a better position than an accountancy firm to get you the best possible price.

 

That is not to say that this can’t be true but it is a good idea to do your homework on this as an unrealistic price is unlikely to result in a favourable sale.

 

Let’s end with a shameless plug

 

Wesellanycompany.com have an ever-increasing number of brokers who we know to be diligent, professional and highly effective when it comes to the buying and selling of businesses like yours. We call upon their expertise and where appropriate can match business owners with their ideal broker.

 

I hope you have enjoyed this post and found it useful. If you have any questions, or would like any help with the buying or selling of your company then get in touch below.

 

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