How to Choose the Right Business Broker
An effective business broker can make the process of selling your business go smoothly and help ensure you get a price and terms that meet your needs. Good brokers have the network and marketing chops to get your business in front of the right buyers, and the business skills to negotiate the best deal.
Conversely, an inexperienced or inept broker can cost you time, money, and stress. Considering the typical brokerage agreement is exclusive and lasts 12 months, it’s worth the time investment to speak with several brokers and evaluate them thoughtfully before signing a contract.
This article is a brief guide to help you find, filter, and evaluate business brokers to find the right one to sell your business. For more on how business brokers operate, see our section on Working with a Business Broker.
Put together your short list.
You may be able to start your search through your own network. If you can get broker recommendations from trusted business associates, that is an excellent place to start. Getting first-hand experience from business sellers who have used them already is a real advantage.
Alternatively, you can turn to the internet. Google searches may be a good place to start, just be aware of real estate agents moonlighting as brokers. It’s common for real estate agents to include business brokerage on their websites to drum up additional revenue streams. While there is some overlap between the two types of brokers, you really want someone who focuses primarily, if not exclusively, on business transactions.
Business broker directories are generally a better place to start, and on BizBuySell, we have the most comprehensive one.
Check out credentials and experience.
Unlike the real estate industry, the business brokerage industry is largely unregulated. In most states, business brokers don’t need any special license, and in the states that do, it is actually a real estate license.
Credentials, Memberships, & Certifications
Even though there is no “business broker license”, many brokers choose to credential themselves. These designations help convey the brokers involvement in the business brokerage community or certify a level of education and experience. Some of the most common designations and certifications you will find are:
- IBBA - International Business Brokers Association - Indicates IBBA membership and an active participation in the larger business broker community.
- CBI - Certified Business Intermediary - Indicates CBI certification, a professional certification which requires adherence to strict ethical code of conduct.
- M&A - M&A Source - Indicates membership of M&A Source, a community of business brokers and intermediaries who facilitate transactions, mergers, and acquisitions of "mid-market" businesses.
- M&AMI - Merger & Acquisition Master Intermediary – Indicates M&AMI certification, which requires holders meet certain M&A transaction experience criteria and adhere to a code of ethics.
If you are using our broker directory, you will see badges identifying business brokers with these designations. While these types of memberships and certifications are helpful to indicate experience and involvement, many great business brokers choose not to spend the time and money to acquire them. So don’t rule out otherwise promising prospects on lack of membership alone.
Experience
Depending on what kind of business you are selling, you may be able to limit your list to brokers with experience in your industry. For example, if you’re selling a restaurant, it should be easy to find brokers who have sold many restaurants in the past. However, if you are selling a unique or niche business, you may want a broker with experience selling businesses of comparable size and with similar characteristics.
The best way to determine a broker’s experience before you start making calls is to look into their current business for sale listings, as well as the types of businesses they have successfully sold. Again, if you are using our directory, you can quickly see their current listings right from their profile. Some brokers will also include a sample of previously sold listings.
Call each broker on your short list.
It is important to speak with several brokers to get context for how each conduct themselves.
Look for a broker who listens to your needs and prioritizes your interests.
When interviewing potential brokers, it's important to keep in mind that the more comfortable you are with your broker, the easier it will be for you to communicate openly. This is essential since you'll need to clarify your needs and goals. You also want to feel that you can trust your broker, who will be acting on your behalf. Choosing a broker with whom you feel you can establish a good working relationship will make the sale process go much more smoothly and provide a welcome peace of mind during this transition.
A good broker will begin by going over your company's strengths and weaknesses, as well as your specific sales goals & reasons for selling, then create a marketing strategy that fits your business and situation. Selling your business can be an emotional time, and if your broker is clear about your sales goals from the beginning, he or she will be better prepared to guide you through the process objectively.
Find a broker with a solid sales strategy and confidentiality plan.
Ask where and how a potential broker plans to market your business, and how they'll go about locating and screening potential buyers. A good broker will be able to outline their sales strategy and advertising budget for you, as well as explain how they plan to protect your confidentiality (if that is important to you). Your broker's sales strategy should cast a wide net, utilizing both online and offline resources to promote your sale.
At the same time, you'll also want your broker to have a good screening process to narrow the field of potential buyers down to serious prospects. This will allow you to concentrate on your business rather than spending time meeting unqualified buyers. It also protects your confidentiality, since you'll be discussing your upcoming sale and details of your business with fewer people.
Take time to process before moving forward.
While you certainly want to hire a qualified, experienced broker who has a good track record and solid references, your peace of mind may ultimately come down to the level of comfort and trust that you have with your broker. Hopefully, all brokers on your short list meet the experience and skill criteria, so take time to reflect on the qualities of each broker and choose the one with whom you felt most comfortable and confident.