Selling your business is an important decision that impacts your life both financially and personally. Of course you want to get the highest value for your business and more importantly you want to make sure you successfully sell the business and in a reasonable amount of time. You also want to make sure the transaction goes smoothly and closes properly.
Selecting the best Business Broker is probably the most important decision in the transaction process once you make the decision to sell you business. We’ve outlined 9 things to ask when choosing a Business Broker.
9 Things to Ask When Choosing a Business Broker, plus one more
- Full Time – Licensed Professional:
Ensure the prospective Business Broker is a licensed professional engaged in selling businesses full time. In California, and most other states, Business Brokers are required to have a Real Estate Agent or Real Estate Broker license to sell businesses. Some licensed Real Estate Agents sell businesses occasionally when the opportunity arises and most are not experienced in business sales-transactions.
Ask the Business Broker about their experience and past transactions. There are thousands of different types of businesses and they may not have sold a business “exactly” like yours, but the transaction process is largely the same in business sales. The important thing is that they have experience selling businesses and they understand the transaction process.
- Upfront Fees:
Most Business Brokers do not charge upfront fees or marketing fees to represent a seller. Broker fees are paid at the close of escrow. Some firms that are not licensed Business Brokers charge large upfront fees for a valuation or marketing package and these fees can range from $5,000 to well over $20,000 – see our blog Business Valuation Seminar Scams for more information.
- Professional Association Memberships:
Ask if the prospective Business Broker is a member of professional organizations such as CABB (California Association of Business Brokers) and IBBA (International Association of Business Brokers). Our firm is a member of both CABB and IBBA.
- Ask for Examples of Confidential Business Profiles:
The Confidential Business Profile or sometimes called CBR (Confidential Business Review) is the prospectus or marketing brochure prospective buyers receive after they sign a Confidentiality Agreement. The Confidential Business Profile is critical as this is what “sells” your business after a buyer inquires.
Ask for examples of the prospective Business Broker’s past profiles. The business profiles our firm prepares are comprehensive and typically 20 to over 30 pages long with pictures, a summary of the business, product-services summaries, equipment lists, and financial summaries.
- Transaction Process:
Ask the prospective Business Broker to explain the transaction process of selling your business. You will want to ensure that every buyer signs a Confidentiality Agreement or NDA (Non Disclosure Agreement) prior to receiving any confidential information about the business including the name or location. Also ensure the prospective Business Broker will be present at all of the Buyer and Seller meetings.
- Confidentiality & Buyer Screening:
Ask the Business Broker if they require all prospective buyers to sign a Confidentiality Agreement prior to sending them any detailed information about the business. Also ask if they require a Buyer Profile or financial statement showing the buyer’s financial wherewithal to complete the transaction. Our firm requires a signed Confidentiality Agreement and completed Buyer Profile before we send the buyer a Confidential Business Profile or provide any details about the business. Our Buyer Profile includes a financial statement and summary of the buyer’s experience.
- Purchase Offer and other Forms:
The Purchase Offer and other documents such as the Buyer-Seller Disclosure, Price Allocation, Contingency Removal and escrow documents are critical in the sale of your business. Our firm uses the CABB Purchase offer and other documents as these are well proven forms developed by the industry trade association and have been used in thousands of transactions. Ask the Business Broker if they use industry standard forms such as CABB or if they use “in house” forms developed on their own.
Perhaps the most important thing in selecting a Business Broker is trust. After you meet with the prospective Business Broker ask yourself, “do I trust him”, “am I comfortable with him handling the sale of my business”? The process of selling your business is complicated, involves negotiations with prospective buyers and often conflicts need to be resolved along the way. It is imperative that you have a Business Broker you trust and see as being competent and experienced.
For information about Selling Your Business and our Business Broker and M&A mid market services Contact Us.