How Do You Choose A Business Broker Based On Their Success Rate With Selling Businesses Like Yours?

​When choosing a business broker to sell your business it makes sense to choose one with a higher success rate rather than one with a lower success rate, right?

Wrong!

But why wouldn't you choose a broker who sells 100% of the businesses he takes on instead of one who sells only 10% (or who refuses to disclose his success rate)?

​"Success rate" is completely the wrong metric to be using ...and I'll explain why: 

1. Business brokers (and other intermediaries) lie. 

Just because he says his rate is 83.4% doesn't mean 83.4% is the truth! He can claim whatever he wants but you have no way of verifying that number. ​Take the claim with a large wheelbarrow of salt! Or do better than that and completely ignore the number offered.

The ones who tend to provide very specific numbers tend to be the least reliable.​

​"83.4%" sounds a lot more credible than "about 80%". The general public seem to be more easily convinced by specific numbers. Some brokers hand out a specific number not because the number is true but because it's good marketing! ​

Try asking them to prove that 83.4% and see what they say! "Oh sorry, we cannot give you access to our entire client list and CRM because of client confidentiality." And that's fair enough. But it means that they have no way of proving that number and require you to simply trust them on it!

I know one business transfer agent / broker who has been claiming a very specific percentage, let's say 83.4%, for several years now. ​​You would expect that specific a success rate to change from one year to the next but theirs hasn't changed for over five years now!

​If your broker has given you a very specific number, or quoted a very specific number on their website, have a look at old copies of their site at archive.org and you may find this number hasn't changed over the years.


2. There are numerous ways of working out a "success rate"

Larger brokers / corporate finance firms / M&A transaction advisers (yes, there are many different types of intermediaries who sell businesses) are often FCA regulated. Some are even big enough to be AIM listed. So they are unlikely to blatantly lie about their success rate. But the number they provide is still not reliable.

Is it a success rate over the last month, the last year, the last 2.5 years? Is it an average over the last five years? Is it including or excluding those clients who pulled out of the sale and/or changed their minds about selling (which does happen a fair bit!)? ​

​There are a million ways you can calculate "success rate", there is no industry standard for this metric. The broker ​can come up with almost any number ​and find a calculation to justify it. This makes a mockery of the whole idea of "success rate".


3. The best brokers will turn their noses up at giving you these numbers

While business brokers at the bottom end of the market are usually happy to hand out random claims about success rates, the more professional firms at the top end of the market do not play that game. If you approach a highly reputed M&A firm, a boutique investment bank or most corporate finance firms and ask them to sell your business, they wouldn't dream of quoting "success rates". They got ​their reputation by being very good at what they do and you've got to take their ability as a given.

They would consider it below them to quote success rates. They might even get offended at the question like a surgeon might get offended if you ask him what percentages of his patients died on the operating table, or a top barrister might do if you asked him the percentage of cases he wins.

On the other hand, mass market brokers, the ones who cold call you or send mailshots out to your business, the ones who deal in the sub £1m market, these brokers tend to boast, in their literature and on their websites, about high success rates.


4. Success rates depend largely on how selective the broker is with what businesses they take on

Any broker or intermediary firm that's highly selective and take on only the easiest clients, clients with highly attractive businesses and relatively low price aspirations, will obviously have a high success rate - 100% or near 100%. That's not a measure of how good the broker is!

But that is quite often what you'll find among the better brokers. They'll only take you on if they see a very high probability of sale.

At the other end of the scale you've got the mass market brokers like KBS (Knightsbridge), Intelligent Business Transfer, RTA, Blacks, National Business Sales etc. They take on anything and everything, even businesses highly unlikely to find a buyer. In fact, many hand out highly exaggerated valuations to persuade the owners to sign up with them. As a result they could ​have on their books literally hundreds of businesses that ​are highly unlikely to ever sell.

So the mass market brokers often have success rates of below 5%! Yes, 95% of the businesses some of them take on are doomed to sitting on the shelf and never finding a buyer. But that low success rate reflects the fact that these brokers aren't selective with what they take on so is not, in and of itself, an indication or how good or bad they are at selling businesses.

​Note: Having a sub 5% success rate doesn't stop some of these brokers from claiming that they sell most of the businesses they take on! They may even quote an 83.4% success rate.

​If you're interested in getting a true picture on a particular broker's real success rate, ​here's now you can work out, for many brokers (not all),  the percentage of success they have.​

Conclusion: They are many good ways to vet a business broker. We maintain the nation's largest (only!) knowledge base on brokers - their fees, fees structures, sector specialisations, cross border expertise, success rates, FCA registration status, customer feedback and much more. Get in touch if you need assistance with finding the right expertise to sell your business.