Few entrepreneurs have the expertise to sell their companies, if and when that time comes. Business brokers can help you get a deal that works for you and your staff.
It will likely be the last major decision you make for your business: To whom should you sell it and for how much?
Most small business owners lack the expertise to handle the sale of a business. That's where the business broker comes into play. As a trained professional, a broker can help set the price, prepare the business for sale, court buyers and close the deal.
Here's how to find the right one:
Trust Your Gut
In spring 2013, after 22 years in the business, Stuart Lebovitz sold USA Baby, a Pittsburgh-based retail store selling baby and children's furniture and accessories. But he didn't go it alone. "I really didn't know much, other than reading some articles online and talking to my accountant," he says.
Knowing he needed professional assistance, Lebovitz searched the web for a list of brokers active in the local community. He also asked his accountant and his lawyer for recommendations, and then started asking questions of the leading contenders.
"I wanted to know how long they had been in the industry, what their experience was, what their process was. That was important to me: Every seller has this pie-in-the-sky idea of what their business is worth, but how would they really come up with a price?" he says.
Eventually Lebovitz choose NFIB member Scott Mashuda, managing director of River’s Edge Alliance Group, which has offices in Cleveland and Pittsburgh. He liked the answers he was getting, but more than this, it just felt right. "A lot of it with me is gut instinct. At the end of the day, I just felt comfortable with him. He was easy to talk to. I felt like we could build a relationship and get this thing done," he says.
Get the Good Word
When Don Myers opted to sell Stu's Music Shop in Westminster, Maryland, it was a weighty decision. His father had established the shop in 1936, and Myers had run it with his brother Larry since 1972. "I wanted professional advice, guidance and consultation from someone who had done this a number of times," Myers says of his decision to bring in a broker.
He didn't hire just any broker, though. Myers wanted not only the right price, but an assurance of confidentiality. He didn't want his employees to walk out, should they hear that a sale was pending, and he didn't want to rock the boat in a competitive landscape. So how to be certain the broker could keep quiet while also ensuring potential buyers would sign and respect confidentiality agreements?
"References were really important, to talk to other people for whom they had handled business transactions," he says. "Were they able to maintain confidentially? Did they help them to prepare the business for sale? Did they help them to establish pricing?"
Before choosing Mike Zarinbaksh of Sunbelt Business Advisors in Bethesda, Maryland, Myers called four references and questioned them in detail. "It was just too important a decision to call any fewer than that," he says.
Business owners need to consider a number of traits when choosing a business broker. Here are a few issues Scott Mashuda of River’s Edge Alliance Group says business sellers should consider:
- Beware substantial upfront fees. It’s not unusual for a broker to take a retainer at the start, but that fee should be minimal, just enough to show that the owner is serious about getting a deal done. Substantial monthly payments don’t encourage a broker to get out there and sell.
- Stay local. Buyers of small businesses are local, their lawyers and accountants are local, and your team should be, too. National names have flash, but you need boots on the ground.
- Consider credentials. There is no easy way to test a broker’s ethics, so look for credentials, especially the Certified Business Intermediary (CBI) designation from the International Business Brokers Association (IBBA). All CBIs agree to adhere to a professional code of conduct and ethics. (Naturally, check references: Ethical lapses will show.)
- Make face time. You’re asking a broker to sell, so it makes sense to evaluate his or her people skills. People buy from people they like. Do you like this person? Take your time in the interview, see how they interact. Are they personable? Do they appear trustworthy?
- Make sure they are current. Lawyers and accountants take courses all the time to stay up to speed in their professions. Business brokers should, too. Elements such as government regulation, pricing methodologies, and industry trends all continue to evolve. Look for a broker who pursues continuing education, who can demonstrate an ongoing commitment to staying current.
Watch now: 7 Myths About Selling Your Business