How do you know if you are hiring a good business broker?
This is an especially hard question to answer on your own. Especially if you’ve never hired a business broker before. Most first time sellers make the mistake of hiring a broker that is maybe “flashy” or promises the world. Choosing a broker because of his promises or “flash” is wrong. When selecting the right broker, there is a lot more to consider than just past clients, how big their firm is, or the often heard promise of “we have tens of thousands of buyers waiting.”
The first major thing to consider is how well do you get along with the broker.
This is important because through the sales process you and the business broker will be communicating a lot. Some communications will be under stressful conditions (due diligence process) and others will not. So, making sure you get along well is key. A good business broker will be patient, understanding, and not have an ego or be rude, especially during those times were you may be stressed out. Also, they should be there for you, almost like an outlet to let you vent. That is why I recommend asking yourself can we get along? Do I enjoy working with him or her? Does he/she seem understanding? Ect.
The next thing to consider is how responsive is the broker?
In my experience, one major factor that “kills” deals is time. Time plays a big role in many steps of the sales process. Most importantly is when a buyer is excited. If a broker takes too long to answer questions or respond, a potential buyer maybe lost. Also, less negatively, it may prolong the deal transaction.
So it is important to find a broker that is responsive and quick to answer questions for prospective buyers, for yourself, and be available throughout “off” hours. Simply put, this isn’t a 9-5 gig. Most buyers search for businesses in the evening and/or weekends. If someone is excited on a late Friday, but doesn’t get a response until midday on Monday, they may have lost interest. Or if a prospective buyer is performing the due diligence process, a slow response may give them second thoughts because they may think something is being hidden.
Make sure your broker is available and responsive. Get their cell phone number, check to see if they are okay with texting, ask them how long does it take them to respond to emails, and so forth. The best indicator was when you first reached out to them. Did they take a long time to reply? If so, then they probably will be slow throughout the entire process.
Another important factor to consider is how connected they are to other professionals?
This is very important because most buyers do not have representation and are unaware of how the process goes. Having a broker that can help potential buyers get lending or find a reliable lawyer to draft an offer agreement is important. Make sure the broker you choose is connected. Ask them if they have preferred lenders or lawyers. Also ask how long they’ve worked with each other. These connections can sometimes give you insight during the sales process. Maybe some inside information may be shared to let you know how things are going.
Is the broker local?
Having a local business broker is a major benefit. One reason is, they can visit your place of business (confidentially) and immerse themselves in your business. At least that is what a good business broker should do. When a broker truly gets to learn more about the business, it better equips them to represent your business to perspective buyers. Also, they can facilitate face to face meeting which build deeper connections between all parties involved in the sales process.
How does the broker get paid?
This is a big indicator of whether to choose a broker or not. A good business brokers will be confident in their abilities and offer a solution that is win-win for both the seller and themselves. I personally would stay away from any brokers that charge upfront fees, require retainers, or have complicated listing agreement.
Most reputable brokers get paid only if they list the business and sell it. Standard commissions are between 10%-15% of the sales prices.
Lets not forget the obvious
A good business broker should have experience. If they’ve never sold a company before, it doesn’t mean they wont become a great business broker one day, but they are more likely to make mistakes during their first sales. So, I would recommend staying away from a new broker or one that works part time.
Most importantly, are they excited about your company and what you’ve built? Excitement goes a long way. If the broker is truly excited about your company, buyers will feel the excitement and become excited themselves.
Lastly, trust your gut!!