Selling your business can be one of the more difficult things you do in life. During the exit process you can count on making several hard decisions; emotionally, financially, and logistically. One major decision will be choosing the right broker to prepare, market, find a buyer, and assist you through the transfer of a business you have no doubt poured you blood and tears into creating.
When selecting a broker there’s a mountain of things to consider. Do they understand the space your company operates in? Do they understand your financial situation? Do you get along professionally and personally? Do you feel they have the temperament to “cool down” the negotiation process when things get tense? Do they understand and want to assist in your overall goals for an exit, or are they just looking for a paycheck? All of these will be important factors in a successful transaction. However, as important as those items are there’s one question you MUST ask your broker before signing a listing agreement. I’m astonished at the tremendous number of listings I come across where the broker observes this blatantly negligent practice and the sellers don’t even know to ask about it. So what is this magic question that can prevent you from being taken advantage of by a broker that doesn’t serve your best interest? It’s quite simple. Before signing any listing agreement ask this:
“Do you co-broker? “
It pains me to see sellers fall into this trap. It’s a gross disservice to a client to refuse co-brokering with an advisor bringing a qualified buyer to the table. It’s unethical to take half the potential buyers out of the pool just so you can receive a higher commission, and yet I see it happen every single day. This practice reduces competition, potentially slows down the selling process, allows a listing to age and de-value, and in my opinion gives the industry a bad name. I know of several outfits that won’t even return calls from other brokers. As exit advisors, our job is to serve our clients first not our bank account. Of course, we do like to get paid at the end. We do this for a living and if we do it properly we provide a valuable service. A good broker will take pride in the process and at the end of a transfer feel confident that both buyer and seller are in a better position to meet their future goals. If your gut tells you that the only satisfaction your broker will get out of the sell of your business is his commission check, my advice would be to move on and continue exploring your brokerage options. There’s an abundance of competent and ethical business brokers successfully serving their clients nationwide, but seller beware, as with any industry, there are individuals that fail to meet the standards the rest of the profession aims to uphold.
By Chris Springfield
VP Business Brokerage
Sperry Commercial Global Affiliates – Griffin Partners