- How To Choose A Business Broker Intermediary - January 25, 2023
- Buying and Selling a Business in a Changing Market - July 22, 2022
- How to Add Value to Your Business - January 18, 2022
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First it’s important to recognize that business brokers or intermediaries, whether they go by the moniker of business broker, M&A advisor, or something else, are marketers and sales professionals. And it’s not uncommon for marketers and sales professionals in any industry to market and sell themselves but then fall short when it’s time to deliver on the service they are selling.
So what are the important items to look for when selecting a business broker or intermediary for the sale of your business? Here are some key provisions to explore:
Business Broker’s Experience
\When vetting an intermediary, ask what types of deals he or she has closed personally and recently. New brokers will often redirect the conversation to the accomplishments of their team, and this might be acceptable if they have access to the support of other business brokers or intermediaries with direct experience. In any case, you want to vet those business brokers intermediaries before you hire them. Ideally you want to work with a business broker or intermediary who has many years of experience and many successfully-closed deals in the industry where your business resides.
Be sure to probe when you hear the term “commercial experience.” It’s important to realize that commercial real estate is a related but a much different specialty than business brokerage, and it primarily comes down to the representation of the business owner versus the landlord or investor. Listen for experience from business brokers or intermediaries who have represented other business owners in the sale of their business with and without real estate ownership.
For example, placing a tenant into a commercial space to open a new restaurant is vastly different than helping an owner sell his or her restaurant to a new owner and assigning the lease.
According to previous IBBA’s MarketPulse Surveys, more than fifty percent of businesses that sell for under $1M are purchased by buyers within 20 miles. The pattern shifts as deals get larger, and it’s only for deals valued in the $2M-$50M range that more buyers come from farther than 100 miles than within 20 miles.
What this means for the business owner is that shopping locally for an intermediary will probably yield the best results unless the business is a very large transaction. Local
intermediaries know the business buyers in the market and can be on site for buyer/owner meetings. They also know local licensing laws and have deal partners such as bankers and attorneys who can facilitate the closing of a transaction.
Great business brokers or intermediaries invest in their education and their careers and that often translates into credentialing. There are many credentials that business intermediaries can achieve, but some of the most respected ones include the CBI, the CM&AP, the CM&AA, and the M&AMI. There are many others, so be sure to research any credential by going to the credentialing bodies that provide them. Some can be achieved over a weekend while others take years to accomplish.
Affiliations with brokerage associations indicate that an intermediary has made a commitment to their field as a career. More importantly, most associations including the International Business Brokers Association (IBBA) and their local affiliates not only require members to abide by ethical standards, but offer educational opportunities and will remove members who violate their ethical standards.
Look for a “Member in Good Standing” status to ensure the intermediary you are considering to sell your business has not violated the ethical standards of their brokerage associations.
Finally, great intermediaries get great reviews. And while business sales are confidential, after the deal is done most happy clients are quick to share the good word about their experience with their advisors on social media. And it goes the other way as well.
Don’t forget to Google the intermediary and their firm and check their ratings with your local Better Business Bureau in addition to your favorite social media review sites. Look for real reviews from actual clients who utilized seller representation services of the firm they are reviewing. Unfortunately, there’s often a lot of noise in these public forums.
As an anecdotal story, I know an intermediary who competed against a commercial real estate broker for a business engagement to sell a business. The owner nearly chose the real estate agent because he told him he could get his business sold and offered a below market commission.
The business owner distrusted the discount broker and ended up choosing the business intermediary. Five months later, the business intermediary had a buyer under contract and they were conducting due diligence on the way to closing the deal. Concurrently, the real estate broker was deported. Had the owner chosen the first option to represent him, closing his deal would have been much more challenging!
For business owners seeking a business broker or intermediary to sell their likely most valuable asset, it’s often easy to pick the most convenient option. But this final decision for your business may be one of the most important ones you make. Not just for your business, but for your financial future.
You can only sell your business once, so take the time and do the research to choose the right business broker or intermediary. The one you choose can make all the difference when it comes to a comfortable retirement, or for the capital you need to begin your next business venture!