How to choose the right broker to sell your business
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. However, not all business brokers are the same or operate to the same standards. So how do you make the right choice?
We have compiled this brief guide to inform you of what to consider before you instruct a broker.
- There is a big difference between selling and representing. How does the broker work? Do they represent hundreds of indiscriminate 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.
- Who will be doing do the work? Make sure you understand who will actually be doing the work for you. It is not uncommon to meet a slick salesman who signs you up only to handed over to a revolving door of account handlers and call centre staff. Clearly this is not ideal and you should know who's doing the work on your behalf. They should be experienced, accountable and have their interests aligned with yours.
- 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. Remember, if it sounds too good to be true, it probably is. Ask what the valuation based on? Have they overvalued your business in order to gain the instruction? Don't be afraid to get a second or third opinion.
- 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 procedures 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.
A familiar and cautionary tale.
A wolf had been prowling around a flock of sheep for a long time, and the shepherd watched very anxiously to prevent him from carrying off a lamb. But the wolf appeared to do no harm. Instead he seemed to be helping the shepherd take care of the sheep. At last the shepherd got so used to seeing the wolf about that he forgot how wicked he could be.
One day he even went so far as to leave his flock in the wolf's care while he went on an errand. But when he came back and saw how many of the flock had been killed and carried off, he knew how foolish he had been to trust a wolf.
The Wolf and the Shepherd, one of Aesop's classic fables.
Who you sell with can seriously damage your WEALTH!
So, how can we help YOU?
Call 0845 644 0266 or 01225 460777 for a free appraisal of your business today.
Contact us to discuss your requirements, or arrange an appointment with one of our directors.
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Learn more about selling or buying a business.
Visit our sister website www.businessvaluationreport.co.uk for our specialist valuation services.
