Choosing the Right Business Broker: A Guide to Ensuring a Successful Sale
As a business owner, you have dedicated significant time, effort, and resources to building your company, often considering it a part of your family. Given the importance of this decision, the fate of your business and employees should not be left to chance. When selling your business, selecting the right business broker is one of the most critical choices you will make. This is likely the first time you are navigating a transition, and the process can be overwhelming. While many brokers may be available, it is essential to choose one who is well suited to your needs. The following factors should be carefully considered when selecting a business broker.
1. Experience and Expertise
In addition to industry experience, a business broker should have experience selling a business that is similar to the size of your business. The type of buyers a business will attract may vary based on the revenue & earnings of a business. Selling to an individual looking for a job is different than selling to a strategic buyer. Both are good; just different. The banking, diligence and transaction structure will vary with transaction size.
Many brokers will advertise access to a broad network of potential buyers, but how many of these buyers are for your business! A well-capitalized buyer will not only increase the likelihood of a successful transaction but will also ensure the best financial terms of a sale.
How is your business broker tailoring their search and outreach to fit the needs of your business? We recommend finding a business broker with the ability to research recent transactions and customize their process to your business.
2. Responsive and Diligent
The sale of a business is an intricate process that demands constant attention and meticulous management. A reliable broker will be both responsive and relentless in their work. I recently sold a business in which the owner called me every morning at 6:45am while on their morning commute and during the final weeks of Due Diligence. The early morning calls provided an opportunity to review the previous day’s progress and discuss any outstanding matters. During this transaction, we fielded 100s of calls/emails and information requests from the buyer. To ensure a deal progresses smoothly and reaches the finish line, the broker must arrange timely delivery of information.
Buying a business is no different. When we represent buyers, the #1 complaint we hear is they cannot get information from a seller’s business broker. Sellers who engage brokers committed to prompt communication are more likely to secure the highest offers and best terms.
3. Integrity and Loyalty
A broker represents you and your interests. Nothing less. They should not be motivated solely by the desire to complete a transaction but should focus on securing the best possible deal for you, the seller. The ideal broker will be transparent, ensuring you are fully informed about every aspect of the process, including potential challenges or issues that may arise during due diligence.
A strong broker will provide honest and candid advice on valuation, timing, and strategy. Their goal should be to secure the best financial outcome for you, while keeping you fully informed and prepared for each step of the process. For example, in a recent discussion with a potential client, I was the only broker who proactively raised the issue of Net Working Capital (NWC) and how it could impact the transaction’s tax implications. I recommended that we meet with their CPA and cooperatively devise a strategy to mitigate tax consequences related to NWC. A skilled broker should have the technical expertise necessary to guide you through the complex financial and structural considerations, while also advocating for your best interests.
4. A Tailored Approach
One of the most critical aspects of choosing the right business broker is ensuring they offer a customized approach. A one-size-fits-all methodology is not appropriate for every business. Your broker should tailor their process to fit your unique needs, goals, and business circumstances. This will involve coordination with your legal and tax advisors to design the most advantageous structure for the transaction. A personalized approach can help maximize the value of your business, optimize tax outcomes, and ensure that the sale aligns with your long-term objectives.
Conclusion
Selling a business is a once-in-a-lifetime event for most owners, and it is crucial to have a business broker who is not only capable but also fully dedicated to achieving the best outcome for you. By selecting a broker that meets your business needs, you will be better positioned to secure the highest offer and the most favorable terms. As we often say, “You only do this once—let’s do it right.”
