For the majority of entrepreneurs, selling a business is a process and not an event.
So, good luck to you if you’ve already listed your business and have had an offer for your business you’d be crazy to refuse, but an average business sale handled by a capable business broker can easily take between nine months and a year to complete.
Considering the rewarding outcome, that’s time well spent if you’re in the hands of a competent professional. But if you have never sold a business before, how will you know you have chosen the best business broker for the job?
Here’s a rundown of some of the points to consider and the attributes you should be looking for in a good business broker whose expertise will guide you through the sale procedure and maximise your chances of doing well in the market.
Horses for courses
Generalists may tell you that selling a business is much more about selling than it is about industry specifics. That is very rarely the case.
Any broker needs to thoroughly understand the conventions and expectations of the market sector they are selling into.
To take one instance involving business pricings, whereas an EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) valuation is common practice in many industries, the accountancy world is oriented towards assessments based on multiples of GRF (Gross Recurring Fees).
Working with a broker who is conversant with your business catchment helps to quickly build trust and rapport with serious buyers. They will always respond more readily to an intermediary who can accurately convey the core information they need to know, and who can discuss business-related specifics with authority.
In addition, certain businesses may need new licensing arrangements or vetting procedures which will have important implications for any prospective purchaser. Your broker must know all about such pitfalls, and must also be well-versed in any common barriers which need to be overcome to convert an interested buyer into a keen purchaser.
Whilst you don’t have to see your broker as a buddy, it’s important that anyone representing your business in the marketplace should at least be on the same wavelength. It doesn’t really matter whether your business is transient and populist, traditional and select, or any other combination of status and persona, it is essential to choose a broker whose own personality and core values are likely to promote and enhance, rather than undermine, the sale process.
At a practical level, this means meeting the broker (or if not the same, the person who will actually handle the deal) a number of times before making a commitment – if possible in different circumstances e.g. in office, at your premises, in the company of other professionals etc.
Matters of scale
Make sure you understand the market level which best reflect your broker’s comfort zone. It is one thing to sell a high street business, but a different thing entirely to sell a business on Mayfair. There are strategies and protocols (no less real for being “unwritten”) which apply at different levels of the market. You must be sure your broker belongs in the kind of markets where your business is likely to be sold.
Consider this issue very carefully because some deals are done in the office, others over a fish-and-chip supper, and yet others on the golf course. Also, it’s very possible a business “insider” will get a better deal, while some sales handled by an “outsider” may just never happen.
A business broker may prefer to receive an upfront fee, or wish to receive a commission based on the sale proceeds. However, in practice, your broker’s charges may incorporate an element of both – though some brokers may even be happy with a “no-sale, no-fee” deal.
The mode of remuneration a broker receives for handling the sale of your business is usually reflected in the way the sale process is subsequently conducted. Those charging advance fees are usually more geared up to resourcing the sale in terms of their research and advertising efforts. Where this basic structure is in place and properly targeted, the whole sale process feels more dynamic and professional.
Furthermore, in the eyes of a seasoned strategic buyer, a proactive approach from such a broker is also likely to be well received, whereas an approach from a broker with a more haphazard approach may seem a little speculative.
Stay in touch with the sale process and make sure it’s always working in your best interests. If your own interest flags, there’s a chance your broker may put your listing on the back burner too.
In the same vein, make sure you’re aware of how long your exclusive contract with your broker will run. For example, if it’s a six-month agreement, this gives you a useful opportunity to review the selling strategy before things start to drift.
Conducting a careful selection process before hiring a broker can seem a little tedious when you plan to dispose of your business anyway. However, choosing the right broker is sure to affect the sale outcome just as much as any other feature.
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