I was recently talking with a business owner who is considering selling his California company. He had found my contact information online, and while he was interested in getting started, he really didn’t know how to evaluate a business broker’s credentials for a sale engagement. Sellers are often unsure what questions to ask. For this reason, I like to spend 15 minutes to share my relevant M&A experience, my career history, our firm’s processes and resources, and our capacity to get a deal done for the prospective client. In this blog post, I’ll focus on pertinent questions that a seller should ask when interviewing a prospective business broker or M&A intermediary.
Many sellers base their selection strictly on how well they like the broker, or on “gut feel.” While it’s vital that a seller and business broker get along well together, a seller should consider this “Likeability Quotient” along with more objective criteria.
Factors to consider when selecting a business broker:
- How long has the broker been selling businesses?
- How many transactions has the broker completed?
- What is the broker’s closing success rate?
- Does the broker’s firm have exceptional valuation expertise?
- How extensive is the offering memorandum that the broker prepares?
- Does the broker have specific domain knowledge in your industry?
- What size deals does the broker’s firm typically work on?
- How many client engagements does the broker work on at any time?
- Does the broker work full-time on deals, or is business brokerage a side-business?
- How involved does the broker stay during the due diligence and closing phases of a transaction?
Hiring the right broker to sell your business is a critically important decision. Asking the above questions will help you select a capable, honest and hard-working business broker by objectively evaluating their background, credentials, work ethic, and capacity for successful deal making. With these questions answered to your satisfaction, add bonus points if the broker has a high Likeability Quotient.
Jordan Zweigoron is a Senior M&A Advisor with Exit Strategies Group’s Silicon Valley California office. He can be reached at (408) 769-4404 or jordan@ExitStrategiesGroup.com. Or connect with Jordan on LinkedIn.