Selling your business can be one of the most important events in your life, so you don’t want to just go with the first broker you find – especially since there are a lot of less than competent brokers out there. It is getting better, with some educational and certification programs from state and national associations starting to gain some traction. However, similar to the real estate market, there will always be some be some brokers you probably would rather not deal with.
Here are some steps you can take to make sure you are working with someone that will guide you through the process of selling your business:
1. Check references from recent transactions. Really do this – it is the most important thing you can do to check on a broker. Selling your business can be a long, arduous process with some tough challenges and conflicts to work through. If a broker has good references after this process, he/she must be doing something right. Don’t take a few quotes without dates. If they give you this, ask to talk to a business owner from the most recent transaction. Don’t take general references from the company itself – ask for references from the individual broker you will be working with. Many large brokerages have a wide range of brokers working for them. Many new brokers wash out within a year or two and you would probably prefer not to work with these brokers.
2. Check Certification and Licensing. More and more emphasis is being placed on being certified as a business broker. The International Business Brokers Association offers the CBI (Certified Business Intermediary) and this certifications mean something. Besides the education and testing required, it also means the broker was committed enough to this profession that he/she spent the time and money to pursue the certification. Having a real estate license is required in many states for business brokerage, and although important legally, it doesn’t mean anything in terms of competence.
3. Don’t be fooled by the marketing. “We Have A Buyer For Your Business!”. The buisness brokerage industry uses this message incessantly. Small business brokers send a note or card with this message. M&A firms send important looking letters on watermarked letterhead, with essentially the same message. The fact is that these firms always (we all do) have buyers looking for businesses, so the message is partly true. But it is unlikely they have a specific buyer ready to purchase your business. Do the research and check references. (By the way, we don’t do that type of marketing – we do pay-per-click web ads and seminars).
4. Don’t rush in. A good broker will give you an opinion of value, if not a valuation report, before asking for a representation agreement. This can take a little while, so you might want to question if a broker pressures you to sign up right away. In fact, we have been working with clients for years, giving them advice on how to boost their value, and waiting for them to decide when the time is right to sell.
5. Check the listings. You might also want to check the size of companies your broker represents to make sure it matches yours. I know of a few brokers that run “Merger and Acquisition” web sites. They are hoping to land a big fish but if you check their listings it will become apparent that they really handle small main street businesses.