BusinessWings quizzed Richard Parker, who has bought and sold businesses extensively, on the merits of employing business brokers in the process of mergers and acquisitions.
Parker is the driving force behind Diomo Corporation, the US business for sale buyer resource.
BusinessWings: Do you have any first-hand experience of dealing with business brokers, Richard?
I used a broker because I didn't want to lose focus on running my business, especially if I didn't find a buyer
Richard Parker: I have been involved in all sides of business sales as a buyer, seller, broker and author of eight 'how to' guides on buying business. With that in mind, of the 10 businesses I owned and ultimately sold, I used a broker in six deals. The other four were sold after receiving unsolicited offers.
BW: Why did you choose to go with a broker in the majority of your deals?
RP: The main reason I used a broker was that I did not want to be distracted from my business. The majority of businesses listed for sale never sell, and I did not want to lose focus running my business especially if I didn't found a buyer.
BW: What makes a good broker in your opinion?
RP: You don't need a broker who will simply throw up a listing online and wait for buyers to contact them. As such, you must determine the precise plan a broker will use to advertise the business, solicit buyers, and get you visibility.
On this note, ask for a copy of sample profiles they have done for other clients. If a broker does not prepare a reasonably detailed overview document on the business outlining the positives and negatives, it typically means they are too lazy to work for you.
BW: Are there any broker's tricks to watch out for?
RP: The business brokerage world is fuelled by inventory. The old adage is “get listings”.
Personally, I think it is an archaic approach. When you meet the broker, if they push for you to sign a listing at the first meeting, forget them.
You want to have a broker whose primary agenda is to learn about your business. You want someone who has confidence in their ability to prove their worth to you without a big sales pitch.
BW: Is there a core trait I should be looking for in my potential broker?
RP: Yes, honesty. You want the broker to honestly express whether or not they feel your business can be sold, and if not, what recommendations they may have to get it to that point.
BW: What's the value of having an intermediary between buyer and seller?
RP: It can make the deal flow better, ease communication, and it can be invaluable when you have to take a firm stand on an issue by letting someone else deliver the bad news.
That aside, it is imperative for any seller to have a meaningful dialogue and channel of communication with the buyer. It is not always effective to have to relay every message through a broker.
Besides, to get any buyer comfortable enough to make an offer, and ultimately pull the trigger, they need all their questions answered and want your assurances that you'll be there for an effective transition period.
