Using A Business Broker to Sell Your Company - Does It Make Sense, An Honest Look At The Issues
By David Annis

Advantages to Using a Business Broker.

An experienced broker will understand the process, so your broker can answer questions, provide guidance, and help you avoid mistakes. The business broker can provide a variety of services, such as valuing the business, providing sample non-disclosure agreements, and screening prospects. This is mitigated by the fact that there are a number of good sources of information and services on the web.

A broker may already know of buyers that will have interest in your business. This is especially true if your business is in a clearly defined niche (whether it is dental practices, payroll, or motels) and you hire a broker that specializes in your niche.

Selling a business is a complex and time consuming process, so retaining a broker may enable you to spend more time concentrating on running your business. You need to keep the business strong, both to get the best price if you sell and because you can never be sure if and when a sale will close. A distraction as big as selling the company may degrade business performance. This factor is mitigated somewhat by the fact that you can buy many of the services needed, as you need them and at a reasonable rate.

By having the initial approach to potential purchasers be from a broker, you can often better maintain confidentiality. This is, of course, mitigated by the ability to buy services as noted in the paragraph above.

Many business brokers are willing to work on a commission only basis. A commission only brokerage agreement allows you to pay only for results. If the economy or your business changes and you take the company off the market you wont need to pay for the broker s work.

In the event that you need to be less pleasant to a potential buyer, the broker can be the bad guy. A broker can forcefully insist on things, such as proof of financial capability that it is hard for a seller to insist upon without risking alienating the buyer.

Disadvantages of Using a Business Broker to Sell Your Company

When you sell on a commission basis, the broker must price his services so that the successful sales pay for all of the sales that do not succeed. Sales can fail for many reasons I ve had hurricanes, owners who decided not to retire, and negotiation impasses. So, paying for an intermediaries time on a fee for service basis can be less expensive than paying a commission.

Brokers are most interested in larger sales, because that s where the big payoff is. If you list a company for sale with a broker who handles larger transactions your business may not get the attention that it deserves.

Unfortunately, in many states anyone can call themselves a business broker.

Commission only brokers are more motivated to close the sale, than to get the highest possible price. If a broker can get 10% more for your company by spending twice as much time on the process or double by selling a second company, he ll take an additional listing and give your company half of his time. This factor can be mitigated by negotiating a non-traditional commission structure.

Conclusion: Selling yourself makes more sense if your business is small, you have time, are willing to do research to understand the process, and are willing to pay up front for services that may not result in a sale. Otherwise, find a qualified, experienced broker.

David Annis is one of the founders of Valuations, LLC whose websites include:

Guide To Selling A Business A comprehensive site that provides information and tools, to allow you to sell your business with or without a broker. The site also contains links to resources for valuing your business, finding a business broker, and doing further research.

Free Valuations Online Business valuations based on your answers to an online interview, with a complete report that explains the methodology used.

Ownership Transitions Advice and services for business owners that want to sell their business independently, at reasonable rates.

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