How to choose the right broker to sell your business and a few do's and don'ts.

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.
  
  
•  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 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.

Some Do's and Dont's print from pdf

DO …check that any value quoted to you is realistic and not just an ego massage in order to win your business or obtain an up-front fee. …be cautious of any broker giving you a haphazard ballpark valuation over the phone. …understand exactly what the broker will do for you and how their services will really benefit you. …make sure that the broker is motivated to sell. Not simply making money running the sale process. …take up references and check the brokers track record. …check the broker has expertise in your sector. …check that the broker doesn’t have any conflicts of interest. Will you get a good service if they're representing too many similar businesses to yours? …check who will be doing the work for you. Beware the flashy salesman, call centre and the office junior. …check that all the fees are fully inclusive with no sneaky extras. Beware the small print and draconian contracts. …check that you won’t just be limited to a listing advert in the papers or thrown up indiscriminately onto inappropriate websites. …check how many businesses the broker represents. This gives you an idea as to how much time they can devote to you. …check if the broker is a member of any trade organisations such as the IBBA. …get a feel for the quality of the sales materials produced so you can understand how you will be presented. …check how confidentiality will be maintained.

DON'T …attempt a sale without giving it proper thought and preferably a bit of preparation. …rush into instructing a broker or be nudged along by a pushy salesman. …instruct a broker without getting several opinions first. …instruct a broker just because you are flattered by the over inflated price he puts on your business. …forget: if it sounds too good to be true - it probably is. …lose sight of what you want to achieve. …have unrealistic expectations. …instruct a broker whose fee structure doesn’t motivate them to get you the best possible deal. …assume that a no-win no-fee broker will be better value. Work out all the costs involved so there are no nasty surprises. For a £1m business, 3.5% plus a small engagement fee is better than 7.5% and no up-front fees. Buy yourself a Porsche with the difference. …be fooled by a bigger is better approach to handling business sales. …be dazzled by fancy jargon. If you don’t understand something ask for a clear explanation. …think it has to be complicated. Handled correctly, it is a very straight forward and thoroughly rewarding process.

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 by e-mail to discuss your requirements, or arrange an appointment with one of our directors.

    Join one of our mailing lists for news, new opportunities and relevant updates.

    Learn more about selling or buying a business.

    Visit our sister website www.businessvaluationreport.co.uk to learn more about our specialist valuation services.

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