Experience Matters

 

According to the New York Times, 80% to 90% of businesses listed for sale with a business broker never sell. No doubt there are many factors that contribute to this that are outside of your control – the economy, the market, and the industry to name a few. The one thing that you can control – hiring the right advisor that will act in YOUR best interest.

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If you see any of these things, beware:

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• The Broker tells you they can get a very high price for your business. Higher than you expected. Beware especially if they tell you this in the first meeting.

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• ​The intermediary wants a big fee paid upfront and/or a monthly before any work is done. Or before the business is sold.

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• ​The broker or their sales people assure you they already have multiple buyers lined up to buy your business.

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• ​​The broker doesn’t seem to know much about business valuations. The broker should be able to discuss business valuation concepts and how they apply to your business clearly and succinctly.

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While there is no guaranteed method to find a good intermediary, here are a few questions you should ask.

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• What is the broker’s experience? It takes experience to successfully sell a business. The average age of a broker is 55 and for good reason. A broker needs experience in accounting, business valuations, law, and especially sales.

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• Is the Broker accredited and licensed? Relevant organizations include the International Business Brokers Association (IBBA) which offers the designation of certified business intermediary (CBI). Someone with this designation has passed courses and an examination. There are other good certifications also.

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• How will they market your business? The broker should be able to exactly show you how they will market your business. What tools does the broker use to identify potential buyers? This should be a multifaceted effort. Every business is a little different so there are many variations and strategies that can be used.

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• What services does the broker provide? The broker should be able to counsel you through the entire sales process. They should be able to provide complimentary services to your advisory team.

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• Is the broker willing to work with your advisory team? Does the advisory team know this intermediary? This will be very important as your advisors know the business better than the broker and can facilitate a transaction. Hopefully, you will have a strong relationship with critical advisors such as accounting, legal, tax and valuation before the time you intend to sell.