The first step in the right direction is deciding to use a business broker because you don’t know what you don’t know!
Ask questions, expect questions and review standard documentation.
Be Bold and Ask Questions
This is your business and selling it should be handled professionally and with transparency.
Credentials such as being affiliated with the national IBBA and local state associations such as TABB in Texas are marks of a knowledgeable broker. However, this information is not always right out in the open. Ask if they have any affiliations. If they are not of these, look up the ones they provide.
Prior business ownership, regardless of the exact type of business, is a foundation of understanding from both sides of the process. Though not necessary, our firm believes in having that connection to better facilitate the transfer.
Expect and be Ready to Answer Questions
The right broker will have a solid understanding of financial analysis and more specifically, an explanation of their own financial analysis process. If they cannot do this…walk away. The first meeting should include them asking you about your business’s financial health and how they plan to market to the right buyers. They should be able to explain these two topics logically and ethically. If they cannot do this…run away. This is not an area of “feeling” the numbers but rather there should be a clear and coherent way they can explain to the seller how they plan to market a business for the price that is dictated by financial and transparent market analysis. From this, options for the deal structure should be presented. The seller should not be railroaded into one plan of attack. Ask about past closed deals and how they were closed, especially for ones that mimic the current company for sale.
First Impressions Really Do Matter
When meeting a prospective buyer, will your business broker be presentable? Will the location or office? Set up a meeting early on to see what the prospective buyer will see. During your meeting, do not be afraid to ask for copies of blank documents such as LOIs, Listing Agreements, Confidentiality Agreements (CA) and Sample Marketing Packages/Plans. These can make or break a deal before negotiations begin. Are they visually presentable? Do they contain viable and valuable content for the buyer?
A major topic of your first meeting or even prior to your first meeting should be that of confidentiality. The broker should initiate this conversation early on. The timing of when it is brought up is indicative of how it is handled in general throughout a deal and even after a deal is closed.
To choose the right business broker to sell your business, be prepared with your questions and with the deliverables the broker should bring up to you. If you cannot check off those boxes in your first meeting, continue your business broker search.
To learn more about choosing the right broker for you, get EXIT – A Business Owner’s Guide To Selling a Company, by Alex Vantarakis.