Selecting a Business Broker or Intermediary to Help You Sell Your Business
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As crazy as it seems, some people spend more time choosing a
coffee machine than they do selecting the business broker or
intermediary that will sell their business. This can be a fatal
mistake that can cost time, money, and sometimes the ability to
sell the business at all.
How do you choose the right business broker or intermediary?
What follows is a list of questions to ask any intermediary when
interviewing them. We also explain what to look for in the answers
given.
No one is going to have every qualification listed. But the
person you retain must be trustworthy, knowledgeable, experienced,
organized, and compatible with you.
Questions to help you determine if the intermediary
trustworthy:
Does the intermediary have written references? Can you call the
references? References indicate a job well done. They indicate that
the intermediary had the dedication to complete the transaction and
provide follow-up. You should be able to call any reference given.
Pick two or three to call and ask the following questions.
***Were you pleased with the results?
***Was the initial evaluation consistent with the sales
price?
***Did the intermediary follow his plan?
***Would you hire the intermediary again?
***Was the intermediary knowledgeable and did he provide good
advice?
***Was the intermediary willing to cover uncomfortable
information such as if the initial asking price might not be
realistic?
The purpose of these open-ended questions is to try and really
find out whom you are dealing with. The answers should be
consistent with the written reference.
Does the intermediary belong to local business, charitable
groups, churches that indicate a place in the community?
Most people who belong to these types of groups have roots in
the community. They generally work hard to be known as quality
people.
Does the Intermediary Belong to Industry Associations that have
ethical codes?
Again this is an indication that someone makes efforts to play
the game fairly. Someone who is always willing to cut corners is
likely to cut corners on you too. In the intermediary/business
intermediary fields the International Business Brokers' Association
(IBBA) has a strong ethical code.
Are the intermediary's statements consistent and do they make
sense?
If the intermediary's statements do not make sense to you, or
are highly inconsistent, be aware that you probably have a
personality or other conflict brewing and you would probably do
better to keep looking for someone else.
Do you innately feel good about the intermediary?
If you do not feel you can trust the person, move on and find
someone else.
Questions to help you determine if the intermediary is
knowledgeable:
What is the intermediary's formal education?
While formal education is not the end all and be all an
intermediary with a working knowledge of business and accounting
and other disciplines related to business is helpful.
Has the intermediary obtained continuing education in his field
of practice?
Every field and profession is under a siege due to the pace of
change. eChanges come from regulation such as changes in tax laws,
from market ups and downs like the internet boom and bust, and
technology just to name a few areas. Everyone can benefit from
staying informed on the changes in their industry including your
intermediary.
Has the intermediary authored or spoken professionally on his
areas of expertise?
To be able to teach authoritatively or to be published is an
indication of true knowledge and depth of understanding.
Questions to help you determine if the intermediary has
experience:
Has the intermediary ever owned a business? Was it sold?
The old saying is, "if you want to understand a man you need to
walk a mile in his shoes". Everyone seems to understand the
benefits of being a business owner.
Unless you have been a business owner you cannot understand the
many difficulties, hardships, and sacrifices that go along with the
benefits. Really understanding your plight means that the
intermediary understands what you are going through and will work
to reduce your difficulties.
How long has the intermediary been brokering?
Other experience can assist in reducing the amount of time that
someone needs to learn the basics of brokering. Yet, under two
years experience and you can bet that the person is still learning
the basics. Why have them learn on you if you can get a pro?
Does the intermediary have any related experiences from selling
other businesses?
Every business is different. There are so many different
industries and businesses that often the intermediary you are
talking to will not have sold an identical business or even one in
your industry. The intermediary should still be able to relate
experiences from other transactions that help you understand where
you are.
Did the intermediaries past experiences relate to his role
here?
Many business intermediaries have had prior positions that use
many of the same skills as brokerage. People who have performed
them are going to have been in many of the same situations and you
should benefit from their knowledge.
Questions that can help you determine if the intermediary is
organized and has a system:
Every intermediary should have defined systems for the following
components of the sale. Ask about any of these. For instance, ask
how will you market my business? Defined systems should at a
minimum include: 1. Information gathering about seller, the
business, industry, collection of financial information, tax
situation, assets etc. 2. Computation of estimated sales value 3.
Development of understanding and agreements between intermediary
and you 4. Creating Business Value 5. Marketing Plan for selling
business 6. Process for qualifying and working with prospects 7.
Offer and negotiation process 8. Completion of documentation 9. Due
diligence 10. Settlement 11. Follow-up after the sale
Then ask follow-up questions detailing what they have said. For
instance if they said they will place a listing on the Internet,
ask "What information is provided on the Internet listing?"
Ask these questions about two or three of the systems defined
above.
The intermediary should be willing to share exactly how they
intend to work your business. Intermediaries need to work on many
transactions so if they are not organized things will fall apart
and your business may not be given the attention it needs.
Does the intermediary work for a firm? If so what does that add
to the process?
A reputable, knowledgeable brokerage firm can magnify your
intermediary's success. By providing back office support and people
to fill in when overloaded a good brokerage office is valuable.
They also have systems and training to assist new agents.
Compatibility:
Through all of the above questions you should be thinking about
integrity and compatibility. The intermediary does not need to be
your friend. In fact that could be detrimental to getting the job
done. But the intermediary must be someone you can work with,
trust, and respect. You must be confident that they will not be
underhanded with anyone including you.
The Crux of the Matter: If you are not 100% comfortable with
your intermediary interview another one. Keep looking. Do not
become a horror story. There are several intermediaries in most
cities. Look until you are comfortable. ***Make sure your
intermediary is trustworthy and a part of the community. ***Make
sure your intermediary is qualified educationally and through
actual experience. ***Make sure they have systems in place so that
the work necessary to sell your business gets done. ***Make sure
you are compatible with your intermediary. ***Is this someone that
can deliver bad news to you and you will still be able to work
with? ***Finally do you feel good enough about your intermediary to
refer them to a good friend?
Make sure the answer to all of these is yes. Your final
financial reward for all your hard work depends on it.
Gregory R. Caruso is an expert at helping business owners plan
and execute the sale of their businesses. Greg is an inactive CPA,
attorney, and business owner with 20 years experience. He can be
reached at www.successfulexits.com.
