You’ve decided you are ready to talk with a business broker about buying or selling your business. It wasn’t an easy decision; there is a lot to consider! You’re a little nervous about making the call and starting the process, but you’re even MORE nervous about making sure you select the right business broker for the job. The wrong person could spell disaster and this isn’t a trial-by-error proposition.
We get it. We really do. So this month we’d like to run through what really matters when selecting the person/group you want to help you navigate what will likely be the largest transaction of your life.
Things to look for when selecting a business broker:
- How long have they been in business? Business brokerage has an incredibly high failure rate. If they’ve been closing deals successfully for at least five years, they won’t be learning on your deal.
- Are they part of a larger network? Business brokers can be independent or part of a network. Independent brokers won’t have the same robust back-office support if they need to increase capacity when they’re working your deal, and they likely won’t be able to collaborate with other brokers who might have your perfect buyer or seller.
- Do they “co-broke”? Even if your broker is part of a larger network, it doesn’t necessarily mean that the brokers will collaborate among each other and bring each other buyers and sellers. Often brokers would rather have the whole fee than share it with another broker, and that isn’t good for you. You want a business broker who doesn’t care where the other side comes from and will share fees to get your deal done.
- Do they have industry credentials? Business brokerage isn’t regulated like many other professions, so you have to look for the alphabet soup after the broker’s name. BCI or CBI are helpful as they are board certifications. CMAI is helpful because they have been certified to do bigger deals. There are a few others out there, but do your research to make sure they are reputable.
- Do you feel comfortable sharing your private information with them? You’re going to spend a LOT of time talking with your broker during a transaction. So will the person on the other side of the transaction, so you should feel comfortable with their ability to maintain confidentiality, understand and represent the deal well, and even their bedside manner.
Now that we’ve talked about what to look for, you might be wondering what some red flags look like. Big one-time upfront fees and monthly retainers are the biggest ones we see out there. There is nothing wrong with asking you to cover some of their hard costs to go to market; however, if they make the bulk of their money without selling your business, your interests simply aren’t aligned with theirs. If they can get rich by marketing (but not actually selling) your business, that isn’t good for you.
If you’d like to talk with us about how we help our clients build and protect their legacies, reach out to us for a confidential conversation.