How to Choose The Right Business Broker When Selling

Selling your business can be scary, especially if you try to go it alone.

So what if you… didn’t try to go it alone?

Hiring a business broker can be the best way to ensure that you are selling your business for the best possible price and make sure you don’t get screwed over by sticky contracts.

Here’s how to choose the right one for your business.

Key Takeaways

• A business broker plays a key role in managing the sale of your business, finding the right buyer for the right price and maximizing the profit you can make
• Look for a broker that has the right credentials, exemplifies professionalism in their communication, and has a proven track record of successful sales in your industry
• To find the right broker, consider your goals, create a shortlist of qualified candidates, interview your shortlist, and finalize your decision

What Does a Business Broker Do?

A business broker plays a key role in managing the entire process of selling your business and helping you determine an exit strategy.

They start by using their expertise to help you prepare for the sale by valuing your business to determine a fair selling price.

Then, they market the business to potential buyers who are a good fit for you while maintaining confidentiality.

A business broker will also screen all potential buyers to ensure they’re qualified and financially able to buy your business.

This broker will handle all negotiations, advocating on your behalf to get the best deal for you and manage the paperwork and legalities to make sure the sale is a smooth transaction done in a timely manner.

When and Why Hiring a Business Broker is Important

It’s recommended to use a business broker whenever possible if you plan to sell your business.

This is because business brokers bring expertise, experience, and resources that can ensure a successful and fair sale.

A broker helps ensure that your business is correctly valued, and marketed effectively and that potential buyers are vetted and legit. They also handle negotiations and the complex and often confusing legalities involved, reducing the time and stress on you as the seller and allowing you to focus on running your business until the sale is finalized.

Brokers are precious if you lack experience in selling businesses or need to maintain confidentiality throughout the sale.

Key Considerations for Choosing a Business Broker

There are a few things to keep in mind when choosing the right business broker for the sale of your business.

Here are some of the key considerations for choosing your business broker.

Experience & Track Record

First, look at their track record and how much experience they have.

Ideally, you’ll have the budget for a business broker with years of experience and plenty of real-world examples of businesses they have facilitated the successful sale of, specifically ones in your industry.

Credentials & Professionalism

There are specific organizations that any good business broker will be a member of.

For example, brokers who hold certifications from reputable industry organizations, such as the International Business Brokers Association (IBBA) or Certified Business Intermediary (CBI) express a level of expertise that makes them qualified to facilitate the sale of a business.

Professionalism is also key, so look for a broker that provides clear, honest communication, is responsive to your needs and desires, and generally conducts themselves with integrity.

Communication Skills

Communication skills are key for any business professional but are especially important when it comes to business brokers.

A good business broker will be an active listener and be capable of communicating effectively with both parties to facilitate a sale. They will keep in contact with you throughout the process, handling your case and responding to your needs in a timely and professional manner.

Transparency in Fees

Hidden fees lurk even in the business broker profession!

A good business broker will be crystal clear in their pricing and fee structure, not blindsiding you with surprise secret extra charges.

Avoid These Business Brokers: Red Flags

It’s just as important to look for negative qualities in a business broker as it is to look for positive ones.

Here are some red flags to avoid when choosing a business broker.

Overpromises

If it sounds too good to be true, it probably is.

If they try to throw out crazy high prices they can sell your business for, they likely don’t know what they’re talking about. Don’t get too excited about the promise of an astronomically high sale price, because they likely won’t be able to deliver.

Asks for Upfront Fees

Beware of brokers who require high upfront fees before doing any work. Most brokers work on commission, so asking for money upfront is something to look into.

While some initial costs for valuations or marketing might be normal, huge upfront payments could mean a scam or a broker who is more interested in quick profit than successfully selling your business.

Uses High-Pressure Tactics

Selling a business takes time and consideration. A broker who pushes you into accepting a lower offer or signing contracts without fully understanding the terms is a red flag.

A professional broker will give you time to consider your options and provide guidance without pressure.

Steps to Choosing the Right Business Broker

Now that you know what to look for and what to avoid, here’s how to find your broker!

1. Define Your Needs and Goals

The first thing to do is define what you need and what your goals for the sale are.

Think about what you want to achieve from the sale, including an ideal selling price, a specific timeline, and any special conditions, like retaining specific employees or maintaining confidentiality.

Knowing what your priorities are helps you communicate those needs with potential brokers to make sure they align with your objectives. This also serves as a benchmark to evaluate the broker's ability to meet your expectations.

2. Research and Shortlist Brokers

Next, start your search and do your homework!

Start by identifying brokers with experience in your industry and a proven track record of successful sales. Be on the lookout for brokers with memberships in organizations like the IBBA, and ones with positive reviews and testimonials.

Analyze their marketing strategies, and client testimonials, and take a moment to look into any other services they offer.

Once you have that, create a shortlist of brokers who seem like the best fit for you and your goals. Narrowing down your options enables more focused and in-depth evaluation during the interview process.

3. Interview Potential Brokers

Now it’s time to get to know your shortlisted candidates.

Come up with a handful of questions that give you an idea of their experience, what their strategy for selling your business would look like, and how they handle challenges like buyer negotiations or deal structuring.

During the interview, you should pay attention to their communication style, how transparent they are about fees, and their willingness and ability to customize their approach to your needs.

Be mindful that the interview is also an opportunity for you to gauge their professionalism and feel out whether you would be comfortable working with them. A successful interview process helps ensure you choose a broker who is qualified and a good fit for your business.

4. Finalize the Decision

Once you’ve interviewed all of your potential brokers, review all of the information and compare their abilities, experience, and approach.

Think about how well each broker’s strategy aligns with your goals and whether their communication style is what works for you.

Before making a final decision, carefully read all contract terms, focusing on fees, exclusivity clauses, and any other conditions. It’s crucial that you ensure you fully understand the agreement before signing.

By finalizing your decision with intention, you set yourself up for a successful partnership that can lead to a smooth and profitable business sale.

How Much Do Business Brokers Charge?

Business brokers usually work on a commission basis, charging anywhere from 10%-20% of the final sale price of the business.

This incentivizes them to sell your business for the best price possible, as they make more money when you make more money.

Are Business Brokers Worth It?

Yes, it’s definitely worth it to hire a business broker to facilitate the smooth sale of your business.

They bring invaluable expertise and experience and are qualified to understand contract terms and get you the best possible deal on the sale of your business.

Bonus: Questions to Ask a Business Broker

Here are a few interview questions to ask your prospective business brokers!

1. What is your experience in selling businesses in my industry?
2. How do you determine the value of a business like mine?
3. Can you provide examples of similar businesses you’ve successfully sold?
4. How do you plan to market my business?
5. What is your fee structure, and are there any upfront costs?

Frequently Asked Questions

How do you select a broker to sell your business?

To select a broker to sell your business, determine your goals, create a shortlist of brokers who have experience selling businesses in your industry, interview shortlisted candidates, and choose the right one for your business considering your budget and goals.

How do I know which broker to choose?

You’ll know which broker to choose because the right one will align with your goals, and communication style, and have industry-specific experience.

How do I choose my broker?

Choose your broker by considering their qualifications, communication style, experience, and cultural fit with your own business.

Do I really need a business broker when selling my business?

Yes, you really do need a broker when selling your business, as they provide legal understanding and experience that you likely lack, and can ensure the best possible outcome for your sale.

When should I hire a business broker?

You should hire a business broker when you’ve decided to sell or buy a business, so fairly early on in the process.