Four Questions Sellers Must Ask

This article was originally published on Forbes on December 21, 2021.

Selling a business can be a once-in-a-lifetime event, and selecting the right business broker is pivotal to ensure a positive experience throughout this process. According to the U.S. Census, over half of the prospective business sellers in 2020 were Baby Boomers who were already at their retirement age; as with anyone looking to sell, they may require professional business brokering guidance to sell their businesses.

Working with a broker has become even more critical specifically with the effects of the Covid-19 pandemic impacting the commercial environment. Sellers desirous of navigating the turbulent economic climate when bringing their businesses to market can benefit from a professional’s view of the current state of the market and the ability to position their businesses to attract buyers in this unique market. According to a 2021 IBISWorld report relating to the U.S. business brokerage industry, businesses that were negatively affected by the pandemic were still successfully sold — and business brokers played a critical role in securing this success for sellers.

However, not all business brokers are aligned to the same operational and strategic framework — and the most cost-effective will not always bring the seller the best outcomes. Before choosing a business broker, sellers should ask four key questions:

1. Does the broker understand how to drive business value?

The goal of a business broker should be to maximize the exposure of a business and negotiate its best price while ensuring their interests align with those of the seller. Achieving this goal necessitates a broker who can step into the shoes of the business owner, fully understanding the sale objectives the seller wants to achieve. The right broker does not simply mimic the narrative of the seller but is instead meticulous about identifying and highlighting the strengths of the business as well as aspects that require improvement before going to market.

2. Does the broker have compelling marketing materials?

Much of the heavy lifting when brokering the sale of a business lies in promoting the business and attracting quality prospective buyers. The right broker has a keen understanding of the impact of strategic marketing and utilizes the latest technology and digital tools to market the business and manage its sale process. The broker’s website and marketing materials are a good indication as to how well they would be able to market a seller’s business.

3. What is the range of services covered by the broker’s fees?

Brokers’ fees can be indicative of the amount of work and focus they are willing and able to dedicate to a business. When comparing brokers’ fees, it is important to look beyond the numbers and evaluate the actual work entailed. The right broker should be able to undertake the valuation, financials recasting, a professional write-up about the business, marketing across a variety of channels and media, negotiation and deal structuring and due diligence management, among others. Moreover, the right broker is proactive and recognizes that listing the business is only part of the process, which only ends when the business is successfully sold.

4. What are the broker’s qualifications and reputation?

Memberships, references and experience go into the qualifications and reputation of a broker. Memberships in key organizations such as the International Business Broker’s Association (IBBA), M&A Source and other reputable industry associations as well as being a certified business intermediary (CBI) are evidence that a broker is a gold standard in the industry. They indicate a broker’s consistent efforts to stay abreast of the latest industry developments and their initiative to upskill and maintain a solid network.

References and experience indicate a broker’s good standing among buyers, sellers and peers and present sellers with a holistic view of the breadth of the broker’s network as well. These certifications and verifications establish a broker’s track record of successfully selling businesses of a specific size, industry and complexity.

However, undertaking selection based only on a strong reputation does not necessarily mean appointing the largest brokerage firm. A brokerage firm could belong to a large franchise or be classified as a boutique firm. Each type of brokerage firm has its strengths and gives rise to different opportunities, and sellers must first define their expectations of their prospective broker before deciding on what kind of firm would best suit their needs.

The Anatomy Of The Right Business Broker

While all brokers can promise to list or sell a business, not all will be committed to bringing optimal outcomes for sellers. The right business broker aims to maximize a business’s exposure through captivating and engaging listings and by leveraging a wide network of qualified buyers. This broker applies up-to-date sales and promotional techniques to negotiate the best price for sellers. Beyond having solid qualifications and a strong reputation, the right business broker should also have this mindset: A broker only truly succeeds once the seller succeeds.

Key takeaways:

Professional guidance from a business broker goes beyond listing a business to include the application of an array of expertise and sales techniques.
Choosing the right business broker will maximize exposure and drive business value for the seller.
The right broker is one who fully understands the sale objectives of the business owner from the outset.
The breadth of services included in the broker’s fees should be a key consideration for sellers, and simply selecting brokers who offer the lowest fees should not be the only consideration.