Selecting a Broker to Sell Your Business

Once a decision is made to sell your business selecting a professional business broker or a business intermediary to broker the sale of your business is the next step.

The terms business broker and business intermediary are sometimes synonymous but generally imply a different level of expertise and differences in their typical transaction values. Frequently, the term business broker refers to those who almost exclusively sell businesses with transaction values of $500,000 or less, also known as main-street businesses. The term business intermediary is frequently used by brokers who usually sell businesses in the range of $500,000 to $10,000,000 and are otherwise known as upper main-street to lower mid-market businesses. Often times, the two do overlap. For simplicity I will use the single term, business broker.

More…Merger and acquisition (M & A) intermediaries usually refer to intermediaries who broker either independently, in teams, or for major brokerage firms, transactions with a minimum value of $10,000,000 and often times for far greater amounts and may include public companies as well.

A great way to get started in selecting an appropriate business broker is by browsing the local business brokers association’s website and scrolling through the list of brokers by geographical area or alphabetically by name. You will generally see the individual brokers’ industry designations posted there as well. The Mid-Atlantic Business Intermediaries Association at serves our large region. Also, see the International Business Brokers Association website at and select your state and browse though the alphabetical listing of brokers by city.

Check with professionals you may know including lawyers, accountants, financial advisors, and so forth for recommendations for business brokers.

There are approximately 20 states in the United States that require some sort of licensing for business brokers and none of those are in the Mid-Atlantic region. This makes the selection and qualification of a broker more difficult and even more important.

The following are key qualifications and points that should be carefully considered in selecting a business broker:

• Years in the business brokerage profession – not to be confused with real estate brokerage experience
• Approximate number of business transactions
• Range of transaction values and industry types
• Industry certifications (especially as a Certified Business Intermediary – CBI)
• Member of local business brokers association and the International Business Broker Association (full time business brokers usually belong to both)
• Real estate licensure
• Company brochures and the content and quality thereof
• Website – appearance and quality
• Personal appearance and attire
• Demeanor and presence
• Computer skills – much of the communicating with and screening of buyers is done today via e-mail as well as advertising on national business for sale websites
• Venues for advertising – should include national websites
• Co-op with other business brokers – most business brokers do not, it is generally to the advantage of the seller if the broker will cooperate with other qualified business brokers
• Assurance of discretion and confidentiality
• References

Most of the bulleted points are self explanatory. One should note, however, that any business broker you may consider hiring to represent you should be a licensed real estate agent or real estate broker in the state your business is located in even if there is no real estate involved in your transaction. This provides you with a possible legal avenue for recourse against the business broker in the event of his or her negligence.

Often times a business broker who has a real estate license is held to the same standard of behavior and potential liability as are other licensed real estate agents or brokers. As an example, in the State of Maryland an individual may file a claim against a business broker who has a real estate license and may be awarded up to $25,000 in damages by the Maryland Real Estate Guaranty Fund.

A business broker with the CBI designation and with at least five years experience should be adept at reviewing, analyzing, and normalizing (recasting) your business financial statements and / or tax returns. He or she should have valuation software programs, industry standard valuation formulas, and access to national done deal databases for comparables.

Establishing the fair market value of the business in addition to developing and implementing a sound and comprehensive marketing strategy are skills the business broker should possess and be able to demonstrate in order to give you the best chance of obtaining the highest value for your business.

Consider what you are entrusting the broker with and expect them to be as professional as your own lawyer or CPA may be. Settle for nothing less than the best!