How To Choose A Business Broker To Sell Your Business

Selling a business is a complex task. Most business owners use the assistance of a business broker to find buyers and to negotiate and close the deal. However, it’s important to get the broker choice right as we discuss in this article.

If a single determinant existed that separated the success stories from those businesses that failed to find a buyer it’s not earnings or turnover. It’s not the size or sector of the business, it’s not the state of the economy.

Most vendors choose a broker who happens to be the wrong broker for their business. They end up choosing a broker who happened to cold call them, one happened to be local or the broker who gave them the highest valuation. Get a broker matched to your individual circumstances, and the profile of your business, and your chances of success improve significantly.

The Five Most Important Broker-Business Compatibility Attributes


1. Sector Familiarity: You’ll often hear that selling a business is selling a business, that the industry your business is in doesn’t make a difference.

This is not true.

A broker listing an accountancy practice needs to know that prices in this specific service sector are quoted in multiples of GRF (Gross Recurring Fees) rather than the more common EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) used everywhere else. A broker who speaks the same language as your buyers will command more trust and is better placed to sell to them.

Brokers specialising in selling sub-post offices will be aware that Post Office Limited needs to approve your buyer. The broker would filter out, right at the start, those buyers unlikely to get head office approval. There’s nothing worse than fighting almost all the way to the finish line just to have the deal collapse on a “technicality”. The broker will also know where “buyer barriers” are and how to overcome them.

2. Personality Match: You’re going to be working very closely with your broker for a long time – months, sometimes more. It’s important you get on well together. As the saying goes, your relationship with your broker is like a marriage …only more important.

Meet several times before appointing them; meet at your offices and theirs. Speak with the person who’ll be handling your deal and who’ll be your contact through the whole process.

The more research you do into the broker, the more you can trust the gut feeling that guides the appointment.

3. Size Matters: Selling a £50 million businesses is very, very different to selling a £500K one. Some brokers are experts at selling Main Street businesss (sub £5M). Others are geared towards Wall Street (£5M+).

There’s no point being able to brag that Goldman Sachs is handling your sale if your revenue is just a couple of million pounds. They are not geared to selling businesses like yours and they’ll do a poor job.

4. The Right Fees: Brokers charge either upfront fees or “success commission”. Most brokers charge a combination of the two, but there are some who work purely on a no-sale-no-fee basis.

A broker who does charge some form of upfront fee (retainer, monthly, other upfront costs) can afford to invest time and money researching the market, finding strategic buyers and running a more professional and proactive marketing campaign to sell your business. The others can’t afford to invest the same resources to get you the best price.

Are you simply looking to “test the market” or fish for offers to get a feel for what the market will pay? Or do you want to give prospective buyers the clear message that you’re serious about selling? Your intent determines the best fee structure for you.

5. Can The Broker Deliver on YOUR Strategic Goals? If expansion, accessing new markets or acquiring funds for growth is the goal behind the equity offering, you may be better off with a merger rather than an outright sale. Smaller brokers tend to not have experience with negotating merger deals.

Similarly with other exit routes such as Management Buyouts. Ask for specific examples of recent deals your brokers has closed and examine how well they worked out.

Can your broker advise on the various options available to you and represent you effectively whichever option you choose?

Conclusion: The broker choice is one that requires careful thought and much research. Many have been sorry for having chosen the wrong broker. Nobody ever regrets spending the time to get the broker choice right. Advising Business Owners Since 2005.