Your business broker is a key ally as you work to successfully sell your business. They can identify and attract the right buyers, support you as you navigate the sale process, advise you about the need for outside experts, prepare for due diligence, and much more. But a bad business broker can do immense damage, not only by offering harmful advice, but also by preventing you from seeking help from a better qualified expert.
Here are some business broker red flags, and how to deal with them.
A good broker has a clear plan for marketing and selling your business, as well as benchmarks for measuring success. If those benchmarks continuously change for no reason, if deadlines are constantly shifting, or if you feel you have no understanding of your role and no ability to assess whether the transaction is proceeding successfully, the relationship may be irretrievably broken.
Changes in Pricing
Pricing should be transparent. You should know exactly how much you will pay for each service, and exactly what you will get in return. If your broker keeps asking for more money, it means they didn’t accurately assess what the transaction would entail. That’s a serious, and costly, red flag. If you're otherwise happy with your broker, ask them to commit to a pricing plan in writing. Otherwise, move on to someone who can lend consistency to your budget.
Lack of Attention
For some brokers, selling businesses is a part-time gig. This means they’re always distracted by something else, and your business is never their first priority. Others outsource the work to interns and junior level associates so they can take on more work and maximize profits. Both strategies can erode the potential for a transaction to succeed, and force you to do more work than necessary. If you’re not getting timely answers to your questions, or if your broker seems permanently distracted or annoyed by your transaction, consider canceling the contract.
Inadequate Industry Experience
It doesn’t matter how much experience your broker has with M&A transactions. If they don’t know your industry, they may damage the transaction. This is doubly true in tech, A&D, healthcare, pharmaceuticals, and other industries that require specific niche expertise. One of the main duties of a business broker is to set reasonable expectations and understand industry norms. Your broker can do neither if they have a weak understanding of your industry. So think twice before hiring someone who can’t provide you with several recent references in your niche. And if you notice problems cropping up, consider that the issue could be one of experience.
Negative Interactions With Buyers
A business broker can help insulate you from conflict with buyers by presenting bad news. But their role is to take emotion out of the transaction—not to inject it back in. A business broker who has negative or inflammatory interactions with buyers is unprofessional, and may destroy deals that could otherwise have succeeded.
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