After deciding to sell a business or purchase a business through a business broker, clients are faced with another important decision – which business broker should they chose?
Like most industries, there can be significant differences from one business broker to the next, many of which can be confusing.
An important point to note is that what is good for the seller can also be good for the buyer. For example, often the biggest concern for a seller is the need for confidentiality. While some brokers freely hand out their client’s financial data and other proprietary information, others do not.
There are some serious risks associated with passing out this information. For example, a competitor might use the information against the seller, or if employees inadvertently learn about a pending sale, they might feel the need to look for employment elsewhere.
There are unnecessary risks when sensitive information is not passed out, it not only eliminates the above risks, but it doesn’t negatively impact the seller or buyer. After all, if the buyer purchases the business, they won’t need to worry about his new business’s financial documents floating around town.
For buyers, a broker with a wide selection of quality businesses is always attractive when they are looking to purchase a business.
This is an attractive attribute for sellers too. A good question for sellers to ask themselves is “Where do you shop?”
A healthy mix of quality and quantity is good for everyone. A good broker will not be afraid to welcome a client’s financial and legal professionals into their process. A good motto for any business broker is “no surprises” for either the buyer or the seller.
Having an accountant and attorney involved in the due diligence process is a lot better than having an accountant and attorney involved after the business has changed hands. For such an easy concept, I’m amazed at how many brokers try and dissuade their clients from using these advisors.
As Northern Nevada grows, so does the amount of out-of-town brokers, some of which are franchises.
If you’re looking for an inexpensive, quick meal, McDonald’s is certainly a reasonable choice. However, when you are planning a once-in-a-lifetime outing, McDonald’s usually doesn’t fit the bill.
For sellers, selling their business is one of their most important decision of their career. Similarly, for buyers, they will appreciate the local broker’s insight and knowledge of the local market.
And finally, a great indicator of a broker’s abilities is their list of referrals. Like any business, what former clients, including both buyers and sellers, have to say is more significant than what the business says about themselves.
Be wary of brokers who say confidentiality of a transaction can prevent producing such a list. Granted, there is a period of time right after a sale is consummated where it is often in the best interest of both the buyer and the seller to remain quiet about the transaction.
However, this period usually expired shortly after employees, customers and competitors find out about the transaction.