How to choose a broker

When you started your business you probably didn't give much thought to how you might ultimately sell it.

Instructing an experienced broker is the first step. How do you make the right choice? With 80% of businesses failing to sell, getting it wrong wastes time and money whilst creating disappointment and frustration. You can severely damage your negotiation position and potential value.

We have compiled this brief guide to inform you of what we think you should be be considering before you instruct a broker.

•  There is a big difference between selling and representing. How does the broker work? Do they represent hundreds of indescriminate businesses and rely on the law of averages to provide a deal flow? Do they charge extortionate up-front fees making more money from running the sale process than actually selling your business? Perhaps they overvalue a business in order to build a large portfolio? Understanding how your broker works and how they will deliver a result is vital if you want to successfully sell your business.
  
  
•  What kind of businesses have you successfully represented? Can a broker provide testimonials or credible proof of success? Does the broker have industry knowledge and contacts? Do they have the experience to get the deal done?
  
  
•  What can I expect from you? A good broker should be able to outline exactly how they can help you and what their service entails. Direct and open discussion with your broker, about expectations and other issues, is critical in selling your business.
  
  
•  How will you find the buyer? What methods will the broker employ to get you the right purchaser? Will it be all encompassing and designed uniquely to you?
  
  
•  What am I worth? Get the business broker to determine a ballpark valuation of your business before you sign instructions. If your price is too high or unrealistic buyers will not be interested. Question why the broker has valued the business the way they have. What is the valuation based on. Have they overvalued your business in order to gain the instruction?
  
  
•  What fees are involved and what do they cover? Understand this in advance so both you and the broker know exactly what the terms are and can focus on selling the business. An agreement should cover how long the engagement is for and the general terms and conditions. Beware the small print and sneaky hidden extras.
  
  
•  How do you protect confidentiality? Make sure the broker has a suitable confidentiality process in place to safeguard your position.
  
  
•  Do you carry Professional Indemnity Insurance? Few brokers qualify for professional indemnity insurance cover, either because their systems and proceedures fail to be underwritten, or the advice they give is inadequate.
  
  
•  Are you a member of any trade organisation? Membership of the International Business Broker Association (IBBA) or other trade group means operating to a strict business code of conduct, ensuring your engagement is handled professionally, confidentially and efficiently.
  
  
•  How will you keep me informed? The broker must be responsive to both to you and your purchasers. Time can easily kill a deal, so avoid unnecessary delays. Find out how the broker plans to keep you informed.