How to Choose a Broker to Sell Small Business?
As you decide to sell your small business, finding an attentive and reliable business broker is an equally important task you’ll make. You don’t want to end up selling your business for a price that is lower than its potential value.
When you hire the right business broker, you’ll feel more assured that they are working for your benefit. You want a broker who will work personally on the tasks and not simply pass the buck to an associate. Successful business sales require the commitment and expertise of the broker – from the preparations down to closing the deal. If your broker cannot show you, buyers, you can start looking for a replacement.
This is why due diligence is crucial in your search for a broker. Thorough research will save you from the lost time dealing with someone who is not an expert in the field or is unreliable. More importantly, it will help ensure that you are paid the right amount for the business that you’ve worked hard to build.
What are the things to look for in a business broker? How to choose the right broker to ensure the sale of your small business? How to avoid bogus brokers? How to identify red flags? Let’s check out below.
First, you want to work with a properly licensed broker who shows that they are legally allowed to work as a business broker in the state. Also, check what local chambers, associations, and industry organizations they are part of. Although licensing is the main requirement, these other credentials give you an idea about their involvement in the local business circle and their level of expertise.
According to an Orlando Business Broker, choose a broker with years of experience – and this should be verifiable. It is best to hire someone credentialed by credible organizations like the International Business Brokers Association. Membership in professional organizations offers assurance. For example, to become an IBBA Certified Business Intermediary (CBI), the broker requires several years of experience, accredited training, and educational credentials.
Businesses differ in many ways, such as size, nature, target market, etc. While it is possible for any broker to sell a business in any industry, you should hire someone who specializes in selling the specific type of your business. If you own a restaurant or an e-commerce business, you want someone who has previously sold similar companies.
Every industry is unique in market, culture, and knowledge base. Hiring a specialist in your sector ensures that your business is properly represented and sold the best.
Ask the broker about the typical size of transactions they handle. For example, if a broker normally manages $5 million deals and your small business is worth less than $1 million, they might not give you the same level of attention compared to their other clients.
Constant communication between the broker and the seller is vital throughout the business sales process. As such, you want to choose a broker who is responsive, open, and honest to you; and willing to take the time to understand you. Know about their modes of communication. During the first few weeks of the process, you’ll be able to assess if the level of communication meets your expectations. You expect to be apprised of sale status and interested buyers as a business owner. Ideally, you want to have regular reports, updates, and calls.
In whatever business transaction, you want to work with someone who is not overly controlling. The broker should be open to your suggestions and other advisors like your accountant, certified valuation analyst, and lawyer. Experienced brokers know how to balance the inputs of each member of the team. An effective broker recognizes the importance of collaboration instead of shutting out others and grandstanding.
Ask the brokers about their sale process. You want to know the steps they’ll take to value your business, prepare the documents and the business for sale, search for prospects and market your business, and negotiate and close deals. Here you’ll know if the broker will personally handle all aspects of the sale or delegate it to someone else.
Lastly, trust your instinct if you are uncertain or don’t feel comfortable with a prospective broker. Like any other partnership, you need to get well together and have good chemistry to ensure a successful business sale.