Hiring a business broker seems to be the most convenient way to sell your business. Considering the fact that the broker will do all the administrative work, your job becomes much easier in a sale. However, there\u2019s a lot that people don\u2019t do or tell you before meeting with business brokers.<\/p>\n
In this article, we\u2019ll cover some key information that\u2019ll help you approach and work with a business broker.<\/p>\n
Before you sign with a broker, get to know their policies and how they do business. The only way to do this is to ask them a few questions. Here\u2019s what we\u2019d ask:<\/p>\n
Business brokers who\u2019ve been in the industry for longer would be more familiar with the customs and practices that surround the sale of a business. While newer brokers might have the theoretical knowledge to sell your business, brokers who\u2019ve been practising for a long time have the practical knowledge, which gives them the edge over others.<\/p>\n
In most cases, business brokers will take 5-10% commission from the total sale price of your business. While this might seem like a lot, some brokers take this a step further and add their own fees plus the commission for their services. So, it\u2019s helpful to know what you\u2019re getting into before you do so.<\/p>\n
Selling a business can take a long time. It all depends on the administration that has to go into it and if there are any legal issues to clean up. Once the business is on the market, it can take several months before a buyer shows interest. Then there\u2019s the due diligence process and negotiations which can take another few months. Overall, a good turn around for a sale should be within 6 months.<\/p>\n
Finally, while you don\u2019t need to know every little detail about the sale, being kept informed is still important. When it comes to how they\u2019ll present your business to their group of buyers or investors and to the rest of the world, you should have a say. Especially if their vision for how they\u2019ll market your business doesn\u2019t fall into what you want.<\/p>\n
Once you\u2019ve decided to go with a business broker, they\u2019ll write an engagement letter that describes their services for you. It\u2019s imperative that you go through this engagement agreement thoroughly so you get a full understanding of what they are and aren\u2019t doing for you during the sale. By doing this, you can mitigate the risks of making basic mistakes and having to pay for additional services without knowing.<\/p>\n
Some business brokers might ask for their commission for the sale upfront. While this might seem hasty, it\u2019s actually a good thing. For one, it ensures that you\u2019ll have their services, and secondly, it shows them that you\u2019re serious about selling your business and that you won\u2019t pull out halfway through the sale, leaving them without any compensation.<\/p>\n
What most business owners don\u2019t know is that they can often negotiate the broker’s commission structure, though. Not everyone has 10% of their business value sitting in the bank account, so negotiating the commission structure would be your only way forward. Likewise, you can also negotiate the percentage of commission they take. Not all brokers will do this, but some prioritise the client over the commission and would be happy to meet you at a fair rate.<\/p>\n
Another thing you should consider is whether you want to be exclusive with one broker or if you want to engage with multiple brokers at the same time. Being exclusive with one broker has its benefits. For example, one broker could offer you all of their attention and resources, ensuring that your sale goes through well without any hiccups. Likewise, engaging with multiple brokers might offer you a larger target audience to market your business in front of. Factor in the time it\u2019ll take to sell your business. Remember, selling your business will take six months or more, so remember to organise any plan reliant on the sale after this period.<\/p>\n
You need to make sure that the termination of your engagement with a broker is clear and actionable. For instance, you don\u2019t want to be locked into a contract that doesn\u2019t have an escape clause; your goal is to protect your interests, which a broker should do as well. However, if they don\u2019t, you might want to stop your contract with them and find a broker who will. For that reason, make sure that the engagement agreement clearly stipulates how either party in the agreement can cancel by giving the proper notice or paying a cancellation fee.<\/p>\n