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International Business Brokers Association - IBBA


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Choosing a broker and making him earn his commission


There are over 400 business brokers in the UK and many of them have earned severe negative press. If you're looking to sell a business it pays to get expert advice on choosing a broker. Some tips on what type of business brokers and business transfer agents to avoid: Cautions.

See also: Where to sell your site 

See Also: 10 Things Website Brokers Mislead You On


CHOOSING A BROKER

Have you ever sold a house through an estate agent who did hardly any of the work. He listed the house on his site and that's the last you heard from him till the house sold and he appeared for his commission? Many business brokers, or business transfer agents are not much different; it's up to you to choose carefully.

Don't rush

First, remember that's there no hurry and you don't have to be rushed into a choosing one. Most people need to speak to several brokers to get a feel for how it all works, what they can reasonably expect, and how much it costs. And a good broker will be quite happy to take the time.

There are similarities between businesses that sell high-ticket items on a commission. Like with the estate agent or  bedroom / conservatory salesman the amount earned on each job is considerable, so the broker will be happy to meet with you at your convenience, go through your figures, explain the process to you and spend a few hours, and all with no obligation on your part to take any decision.

Association memberships

There is no single international vetting agency that all business brokers subscribe to so it's less than easy to check their credentials. However, some countries, and some states in the US do require business brokers to be registered or licenced. It's relatively easy to do some basic enquiries on a broker operating from such an area.

You should feel free to ask your broker if he's a member of any association/trade body/better business bureau/other organisation.

References

Sell Your WebsiteYou could also ask the broker himself to provide references... and do follow them up by contacting the referees.

You can also seek out recommendations yourself. If the broker has businesses for sale listed on his website you essentially have a list of their current customers. OK, you won't mass mail them to participate in your online poll... but a discreet phone call or two may not hurt.

Multi-agency

Co-brokering involves a commission sharing deal between two brokers. Not all brokers will co-broker and, in some cases, this reluctance may limit your "reach".

Professionalism

They aren't selling a $500 used car. Expect only the highest levels of professionalism. Are they well presented? Do they keep appointments? Do they return calls promptly? Do they seem to know what they are talking about? Do their documents, letters, forms, policies, procedures, contracts, disclaimers etc., seem professional? What type of confidentiality agreement do they send out to prospective buyers? What type of ads/locations do they use to advertise the businesses they are selling?

If you suspect shoddy, they likely are.

Optimism

Landing your order is pretty important to the broker. So he may exude confidence that he can get you your asking price or higher. And within a very short period of time. Then he may ask for an up-front payment while you are still all excited about having found the "right" broker. Sometimes alarm bells are just alarm bells.

Some other articles worth reading may be here.

MAKE YOUR BROKER EARN HIS COMMISSION

He's on your side so work with him rather than against him. Ask at the outset how you can complement his efforts.

Ensure that at least part of his reward is based on a percentage of the achieved sale price. Do remember, though, that an additional $10,000 for you may provide only a $500 incentive for him (at 5%).

Make him weed out the tyre kickers. Pre-agree what type of buyer you'd consider qualified. If you're looking for funds up front there'd be little point in extensive negotiations with a buyer who assumed you'd finance up to 50% of the agreed price (sellers often do finance the sale by taking deferred payment).

Cooperate with the broker in drawing up the Sales Memorandum / Business Plan but don't be afraid to ask for it to be amended, polished, or changed till you are completely satisfied with it.

Let him handle the legal issues relating to confidentiality, and requiring confidentiality from prospective buyers.

Have a clear out-clause. If he is unable to sell your business within a specified time you want to be able to pull out and try someone else.

Want a broker to help you find a site to buy?

Brokers can also help you find a site to buy. You'd explain what you're looking for, what your budget is and the industry you're looking to buy in. If there's is a big, well established company they'll have a database of sites looking for buyers. They'll go through their database and find those that match your criteria.

Smaller brokers tend to not really have many/any sites on their database, or they have sites whose sales details they've copies from other broker sites/online auctions. That's not necessarily a bad thing. If they're willing to trawl places where sites are sold to find you a site then let them do it.

Payment for finding you a site is not generally taken in advance or on finding you the site but on the completion of your site purchase.

Remember, though, that the broker is acting on behalf of the seller and you can't therefore rely on his opinion. Get him to point you to the business that ticks all the right boxes but do the due diligence yourself. Brokers want to sell you a business - any business - that's how they get their commission. You want to ensure you buy the right type of business. Recognise that those two goals don't overlap.

Cutting through the broker's sales pitch

A broker may make all kinds of claims as to why you should go with him and not sell your site yourself. Here are ten of the top ten claims they make ... and a guide on how to decide whether they are worth their commission.