Why does my business need the services of a Business Broker?
Hyde House has an excellent track record of selling businesses for its clients:
Whether you are reading this as a manager, a director or a partner of a business, or as a group of shareholders or perhaps as an entrepreneur having built a substantial business and you are thinking about selling you will need to engage a professional business broker.
Creating and growing a business is substantially different to selling a business, and even if you have sold a business previously, as an owner or within employment, the reality is that to ensure that a transaction takes place and is not inadvertently crashed by the seller you will need the specialist skills of a transaction expert; Someone who is in the thick of the process of selling larger businesses on a daily basis. Therefore someone who has experienced every twist and turn that deals throw up. No deal is ever the same as the one before.
Affordability should not concern you, as the question should be ‘Can we afford not to employ a broker?’ The services of a Business Broker should be viewed, as ‘invaluable’ because the role of the broker should be to achieve the maximum value possible for the business whilst ensuring that the buyer has the right profile and the contracts are sufficiently strong to avoid any financial penalty after the sale has taken place. In most cases the main fee for a broker comes from successfully selling the business and so there is no substantial financial burden to the vendor until an agreed transaction takes place.
Not all Business Brokers are the same. Some operate a basic
advertising model and do not spend much effort for you in terms of
finding a buyer. Others specialise in smaller businesses or
extremely large businesses. This article is aimed at the substantial
mid market sector. Clearly therefore you will need to know how to
differentiate the various broker types out there. Here are some tips
as to who to avoid if you are faced with statements, claims or
requirements such as these:
We have hundreds of businesses for sale!
This suggests that the broker’s model is one based on collecting up
front fees and living off them, rather than focusing on giving a
personal service to a valued client in order to secure a buyer as
quickly as possible.
We have hundreds of buyers for your business!
Some brokers may claim that there are literally hundreds of suitable
buyers for your business and that their process is to approach all
of them, then whittle down the numbers to about 100 and then whittle
down the numbers to … You get where I am going on this one. There
are not hundreds of buyers. There may be some. A scattergun approach
such as this, despite protestations to the contrary, is not
scientific, does not bring results quickly and is a way of
‘outwardly demonstrating’ how hard the broker has worked for his
initial fee. In these circumstances it is almost certain that the
fact your business is for sale will leak into the market place and
make the promise of confidentiality worthless.
You need to pay an upfront fee!
Most brokers will want some form of fee up front but this should in
normal circumstances be sufficient to cover basic expenses and show
your commitment to the process only. It should not be substantial as
the main earnings of a broker should be from a successful sale. Any
broker that front ends its fees is really showing a lack of
confidence in being able to complete the sell of your business.
Beware of Exclusivity
It is right and proper that the broker should expect exclusivity.
But it is not right that they should expect it regardless of
performance or forever. Check carefully how the broker is going to
report progress to you and make it clear on what grounds you would
want to walk away from the agreement. E.g. I will not hold you
exclusive for more than 1 year.
Just sign here!
Do not be pressured into signing an agreement in your office with
the broker present. Be highly suspicious of the intent of the
agreement if it runs for more than one page. Clearly brokers need to
protect themselves but fundamentally the job spec is simple. I
appoint you to sell my business and I will pay you an initial fee of
(keep this reasonably low) and a success fee on completion of
contracts of x%
Meet junior!
Some brokers will send their most experienced executives to ‘sign
you up’. These executives may tell you about how they will move
heaven and earth to sell your business and you may indeed be
impressed. You will be less impressed when the recent school leaver
is the day-to-day contact. Make sure that the person who says he /
she will give you personal attention actually is going to do so.
Is it really worth that much!?!
If you react with surprise or shock at the high valuation placed
on your business then be on your guard. Remember it’s your business.
You are in business because you have shown commercial awareness. You
will know instinctively how much your business is worth within
sensible parameters. Some brokers deliberately over value on the
basis that if you appoint an estate agent who gives the highest
valuation of your home you will do the same for your business.
Wrong. Failing to meet value aspirations in business creates
conflict.
Here are some straightforward but testing questions for anyone that you might talk to wanting to represent you in the selling of your business.
1. What was the last business you sold?
Seek to that it handles businesses of similar value to your own
and that it has worked in your business sector.
2. When did you sell it?
Seek to establish how active the broker is. The same firm that
claims loads of business on its books should be able to demonstrate
similar sales volumes. A smaller firm will be delighted to reveal
that they survive on much smaller volume, giving personal service
and delivering a top class service.
3. Where did you sell the business?
This is a curved ball but remember the market for your business is
not limited to the UK. You may want buyers from Europe, Asia, USA
and rest of the world!
To discuss how the broking services of Hyde House could benefit
your business please call us on 01604 864 353 or email us at
mail@barryparsons.com
