• Brokers are here to help guide you through the process and present you in the best light possible, making sure nothing is missed.
• AVOID brokers that claim to have lists of “thousands” of buyers or know people looking, etc. Lists of buyers are basically worthless. Investment banks and some brokers may deal with specialized private equity groups if your business fits their niche, but outside of this large lists don’t hold a ton of value. Avoid brokers who give stories about past clients or talk about businesses they have sold before
• Focus on brokers who listen to you. Brokers who try to understand who the right buyer might be.
• Find brokers who tell you upfront if they believe your business is better as cash deal, finance, structured.
• Brokers tell the story about your business, not about past businesses or tall tales.
• Avoid brokers who want to push you into due diligence fast and let buyers walk away for free. Rules for due diligence need to be clear. Don’t rush into due diligence with anyone. This is a mistake. An agreement not to compete and disclose information should be signed for the area where your business is located. As long as terms are met breaking out of due diligence should cost the buyer. Due diligence is not free.
• Serious buyers understand due diligence is not free.
• Brokers who try to sell businesses over $10,000,000 in revenue a year. Business brokers should specialize in small business, usually $3,000,000 or under in revenue. $5,000,000 would be high for a business broker. At $5,000,000 or above in revenue, it might be worth consulting with a boutique investment bank. Investment banks must be FINRA certified and offer a more in depth service than your average business broker. The 5 to 10 million area is a very gray area. Above $10,000,000 you should most almost always consult with an investment bank first before pursuing any other avenues.