Like many professional business services, hiring a broker is a bit dauting. You go online to search, and there in front of you is a list of brokers that all promise the same thing: “we’ll get you maximum value for your business”, “we value confidentiality”, “we are experienced”. Yes, any broker worth their salt will say this–because those qualities are table stakes for what a broker should be delivering to any client. So, here are 7 most common mistakes I see from business owners when selecting a broker. By avoiding these mistakes, you can cut through the sea of commoditized business broker websites to find a quality broker that’s a great match for you.
Mistake 1. Hiring a broker that doesn’t have the right Credentials
For many owners, this is one of the most significant transactions in your life. You want to have someone by your side that has the right experience, and a proven resume. Look for a broker with the ‘CBI’ industry credential. A broker with CBI (Certified Business Intermediary ) designation indicates they have logged several years to intermediary work as well as continue with relevant education.
Mistake 2. Hiring the First Advisor You Meet
Business Owners are a busy bunch – but streamlining your search down to one meeting can hurt you in the long run. Take the time to speak with at least two advisors. When the deal heats up, you’re going to be working with this person every day. Talk with a few brokers so you can get a feel for some different personalities and strategies–one size doesn’t fit all!
Mistake 3: Choosing an Advisor with the Wrong Specialty
Brokers can specialize by industries served, geographic location, size of transaction. It’s good to understand the bulk of the brokers work, and if your company fits the mold. That is not only helpful so they have the knowledge to value your business and represent it properly, but it’s also important they have the right type of buyers in their rolodex. Ask if they typically sell businesses of your size–if you are going to be a $1m transaction and they are often dealing with $10m deals–you may not get the attention you deserve. Alternatively, you may have their attention but be, by far, the largest deal they have done.
Mistake 4: Not Seeing Marketing materials and examples
Brokers will put together a multi-page business profile to share with buyers–and this document is a buyer’s first impression of your business. How will your business be presented? Some times it’s an unedited word document, other times it’s a nicely laid out report. Ask to see some examples for other clients they are currently representing (sign an NDA to see if you need to!)
Mistake 5: Not Asking how involved they will be at all points in the process
A strong broker should walk you through their specific process for selling your business. A good follow up question to ask how involved will they be at each step. Will there be other associates or team mates helping at any point? Are they actively marketing your business, or are they just load the listing on websites and waiting for buyers to come to them? Will the broker be assisting when attorneys get involved, or do they sit out at that point? A more boutique firm will manage the process end to end – a higher volume broker may just connect the buyer and seller and leave the rest to be sorted out by the attorneys. It’s a good question to ask so you find someone that will provide you the right level of support.
Mistake 6. Not Understanding How They are Paid
All brokers have different fee structures – so it’s important to make sure you are clear on how they anticipate getting paid. I personally consider it a red flag when any sell-side broker asks for a significant up-front fee before any work is performed. In short, if the broker’s fee structure does not align their performance with your goals and best interest, do not hire them.
Mistake 7. Selecting a broker on price alone
When brokers all look the same at first glance, it’s easy to default to picking the lowest price service. I hope this list goes to show that a more expensive broker may provide you a higher level of service, attention, and ultimately be well worth their fee by providing you an efficient, fruitful, stress-free process.
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