How to Select a Business Broker

Oct 28, 2022 9:47 pm

As with any good or service every business owner or potential business buyer has a choice when it comes to who they prefer. Sometimes selecting the right business broker for the job can be a daunting process. The first thing to know is that using a business broker will often produce better results.

When it comes to choosing the right broker for the job, remember the five C's:

Collaboration - Will they work with others?

Brokers that co-broker with other reputable brokers in and out of their home firm are more likely to be team players and have the know-how and clout to get your deal across the finish line

Credentials - Do they have education?

A broker without letters after their name can mean inexperience. Business brokerage isn’t as regulated like many other professions, so look for things like MBA, CBI, BCI, BTS, and CMAI. If a broker has letters after their name it's okay to ask what they stand for. Generally speaking, brokers aren't shy and love to talk about their letters! (Sometimes a little too much :)

Comfort - Are you comfortable with them?

You’re probably going to spend quite a bit of time talking with your broker during the transaction--as will the person on the other side of the transaction--so you should feel comfortable with their ability to maintain confidentiality while keeping the deal moving.

Connected - Are they connected?

Business brokers can be independent or part of a network. Independent brokers won’t have the same robust back-office support if they need to increase capacity when they’re working your deal, and they likely won’t be able to collaborate with other brokers who might have your perfect buyer or seller. Look also for a broker with people in their network that specialize in larger or smaller deals. You may not need an M&A advisor that does $100MM deals on the regular but having access to that expertise can help a deal of any size get across the finish line.

Closings - Do they have closings?

Business brokerage has an incredibly high failure rate. If they’ve been closing deals successfully for at least five years, they won’t be learning on your deal.

Now that we’ve talked about what to look for, you might be wondering what some red flags look like. Big one-time upfront fees and egregious monthly retainers are the biggest ones we see. There is nothing wrong with asking you to cover some of their hard costs to go to market; however, if they make the bulk of their money without selling your business, their interests simply aren’t aligned with yours. If they can get rich by not actually selling your business, that probably isn’t best for you.

If you’d like to talk with us about how we help our clients build and protect their legacies, reach out to us for a confidential conversation. In fact, CONFIDENTIAL is the sixth, bonus, C! If a residential real estate agent that's accustomed to selling a house by putting a sign out front and publishing the address all over the internet wants to sell your business they may not understand the need for full confidentiality. Look for a broker that isn't running their mouth and has the experience to back up their claims.

As always, I look forward to hearing from you soon!

Happy Friday,

Josh

JOSH GRODE WOLTERS, MA, MBA, BTS

Business Broker | M&A Advisor

· $23M closed transactions ·