Question:
I have decided to sell my successful business. I am leaning towards selling it on my own. I see all these websites available to list businesses and my inquiries to my accountant and attorney have not been favorable about business brokers. What do you think?
Answer:
In the past sixteen years I have personally purchased ten businesses and sold nine.
Except in the few cases where I put together a deal with a competitor or someone who approached me either to buy or sell, I have always used a business broker on the sell side.
I also do intermediary work and so I understand all sides to your question.
Although I appreciate the comments you received from your attorney and CPA, I am not certain that they really know the full extent of what is involved in a business sale. I have always felt that even if the broker does less than a brilliant job, at the very least I can let them handle all of the running, organizing of the documents, being a buffer or messenger on difficult issues and above all, I can remain focused on running my business while they deal with inquiries.
It is certainly true that any seller can utilize the Internet to advertise their business but the real work begins once there’s a potential buyer.
You cannot even imagine the amount of detail involved. In this regard a business broker can help significantly.
Unfortunately, like any other profession, there are good and bad business brokers. I have heard plenty of stories from sellers that simply felt the broker did “nothing” and then begrudged or disputed the commission. This is true in any field and so it is ultra important that if you truly want to get value from your broker relationship to engage one who you feel will go above and beyond the norm to make a deal happen. A few things you will want to know are:
- How are they planning to promote the business? Will they just put up ads on the Internet? (you can do that)
- How will they package the business ? how detailed will the profile be that they will write up for prospective buyers (be realistic in that a small restaurant will not necessitate a 30-page Offering Memorandum)
- What is the nature of their relationship to you? Is it a fiduciary duty? Are they strictly acting in a transactional capacity? Who do they really represent, if anyone? You need to clarify this early on so there’s no mistaking to whom their allegiance, legal or otherwise, belongs.
- What will they do to bring you qualified prospects?
- What process do they go through to conduct their valuation?
- Are they successful?
- How many business listings do they carry?
- Did they come equipped to the meeting with a list of referrals for you to contact?
Two small things I have found to be a good test at the first meeting are:
- Do they really dig down to learn your business, asking you a lot of solid, probing questions, or do they just push for a listing?
- Give them a task or two to follow up and see how quickly they respond after the meeting (one thing can be to get a list of referrals or a sample profile they’ve done).
All of this aside, there are no hard rules for whether or not to engage a business broker.
I personally feel that the right business broker can be a huge asset and when they do their job right, you will pay them their commission and thank them because they’ll have earned every cent. Just be certain you hire the right one.