Graham’s Guide Chapter 6: 

 

Choosing the Right Business
Broker

By this stage you’ve prepared your business, improved its value and started thinking seriously about going to market.

The next decision can have a significant impact on both the sale price and the overall experience: choosing the right business broker.

Many owners interview only one broker. Others choose the cheapest fee or the highest valuation. Neither approach necessarily delivers the best outcome.

A good broker is more than a salesperson. They are a strategist, negotiator, project manager and trusted adviser throughout one of the biggest financial transactions of your life.

What Does a Business Broker Actually Do?

A professional broker should do far more than advertise your business. Their role includes:

·      Helping determine an appropriate asking price

·      Preparing a confidential Information Memorandum

·      Marketing the business confidentially

·      Qualifying potential buyers

·      Managing confidentiality agreements

·      Coordinating inspections and meetings

·      Negotiating offers and terms

·      Keeping the transaction moving through due diligence

·      Working with lawyers and accountants through to settlement

Choosing the Right Broker

Not all brokers are the same. Experience, communication, industry knowledge and negotiation skills can vary considerably.

When interviewing brokers, consider asking:

·      How many businesses similar to mine have you sold?

·      How will you market my business confidentially?

·      How do you qualify buyers?

·      Who prepares the Information Memorandum?

·      How often will you communicate with me?

·      How do you handle multiple offers?

·      Can you provide recent client references?

Don’t Choose on Price Alone

The lowest commission is not always the least expensive option.

A broker who negotiates an additional $100,000 on the sale price has often more than justified a higher fee. Focus on the value they are likely to create, not simply the percentage they charge.

Graham’s Tip

If a broker tells you exactly what you want to hear, ask yourself whether they’re trying to win your business or genuinely advising you.

A realistic opinion today is far more valuable than disappointment six months from now.

Exclusive vs Open Listings

Most business sales are marketed under an exclusive agency agreement. This allows one broker to invest the time and resources needed to market the business properly while providing a single point of contact for buyers.

Ask your broker to explain the agreement fully so you understand the obligations of both parties.

Broker’s Desk

The strongest sales are built on trust. Owners who communicate openly with their broker, share concerns early and work as a team generally enjoy a smoother process than those who treat the broker as simply an advertiser.

Common Mistakes

·      Choosing a broker solely because they quoted the highest price.

·      Selecting the lowest commission without considering experience.

·      Failing to disclose important issues early.

·      Expecting the broker to ‘work miracles’ without proper preparation.

·      Trying to manage buyer enquiries independently once the campaign has started.

Action Checklist

·      Interview more than one broker.

·      Understand the proposed marketing strategy.

·      Discuss pricing openly.

·      Review the agency agreement carefully.

·      Agree on communication expectations.

·      Commit to working collaboratively throughout the campaign.

Looking Ahead

With your broker selected and your business ready for market, the next step is preparing the material that buyers will see and deciding how to launch the business confidentially.

In the next chapter we’ll explore pricing strategies, Information Memoranda and how to take your business to market without unnecessarily alarming staff, customers or competitors.