As with so many business decisions, deciding whether or not to hire a broker when selling your business depends on individual circumstances. In some situations a business broker might only add expense to your sale; in others it’s tough to imagine a deal getting done properly without the assistance of an independent expert who has an arsenal of networking contacts.
Probably the biggest consideration in whether or not to hire a broker when selling your business is what kind of industry you’re in and your level of familiarity with it. If you know all your competitors, run into them regularly, and are on good terms with them, you can probably handle the initial approach yourself, and perhaps even the negotiations.
A Simple Do-It-Yourself Test
Don’t decide to sell your business yourself before answering the following four important questions:
- Do I know what my business is worth?If not, strongly consider getting an independent appraisal or relying on a business broker.
- Can I draw up a list of likely buyers?Think competitors, suppliers, strategic partners, and customers.
- Do I really have the time to do this?Honesty counts here. Doing the networking yourself is incredibly time-consuming.
- Can I do a better job than anyone else? If you’re articulate, passionate about your company, and not self-conscious about pitching it, the answer to this one is probably “yes.” If not, step aside.
If your answers to this checklist indicate that a broker is in your future, interview several candidates carefully to ensure they’re qualified. Following are some sample questions you should be sure to ask:
- What kind of experience do you have selling businesses such as mine? It takes more than a go-getter attitude to sell a business. Competent brokers need valuation and accounting experience, knowledge in the legal aspects of selling a business, salesmanship, and patience. In short, a good broker has been around the business block before entering the profession. Therefore, if your potential business broker looks like he or she just got out of college, they probably aren’t the best choice.
- Are you a member of a trade association? Do you hold any accreditations? If a broker belongs to an association, it shows you he or she is attempting to stay current within their profession. Accreditations like a certified business intermediary (CBI) are an indication you’re dealing with an experienced individual.
- What services do you provide? Any qualified broker will be able to help you valuate, package, and market your business. After you’ve heard two or three proposals, you’ll get a good idea of the type of services available to you. Remember, however, that you want to hire someone with strong financial skills, so look for signs that your broker has them.
- Can I talk to the owner? If you start out talking to someone who isn’t the owner of the firm, eventually ask to speak to him or her, then ask them the questions you asked the first person. If the answers aren’t similar, you probably aren’t dealing with a reputable firm. Also, ask what kind of recourse you have if you’re not getting any activity on your business.
- What kinds of tools do you use to research buyers? The broker should have at his or her disposal research tools like Dun & Bradstreet, CapitalIQ, and OneSource, which they can use to find buyers and general information about the seller’s industry. The Internet has also made the world smaller for sellers, and a good broker takes advantage of that.
- How will you market the business? Each business needs a unique approach to its marketing campaign and every business brokerage firm is different, so there are many combinations of campaign strategies that might be appropriate. Discovering what tools a firm has and what their philosophy is will help you determine how committed they are to selling. It’s also a good idea to request brochures and presentations that the broker has published for other clients. If one look at these marketing deliverables reveals multiple typos and incompleteness, scratch that broker off your list.