How To Choose The Right Business Brokers To Sell Your Business?
The best way to choose a broker would be to have us shortlist from the 1000+ UK firms to choose one that is best matched to the sector, size, geographical location etc., of your business and fine tune based on fees, fee structures, contractual terms and other criteria you agree with us. Let us match you with a business broker.
However, if you intend to filter brokers yourself, you've got a near impossible task of finding the right one. Here's why.
But if you still want to do it yourself, here's how to choose the right broker for your business:
- Decide whether using a broker is right for your business (brokers are not suitable for most businesses!) ... more;
- Make sure you choose the broker, don't let the broker choose you ...more;
- Start with a good business broker directory (not a search engine)... more;
- Remember to include transfer agents, corporate finance firms, M&A advisors and other professionals who go by different names but provide the same service ...more;
- Filter based on sector specialisation and client size ...more;
- Reseach each firm thoroughly looking at, for example, their entries in review and feedback sites; professional memberships etc... more;
- Once you are down to 10 or 20, speak with each and get a copy of their contract plus their fee schedule ...more;
- Carefully review all the terms, do not let them pressure you into a decision ...more.
Decide whether using a broker is right for your business
Business brokers are better suited to the sale of larger businesses. If your business has a turnover of under £1 - 2 million per year, or a profit of less than £100,000 per year, using a broker may not be the best way of going to market.
Reasoning: The best brokers charge a large upfront fee, usually a five figure sum ...and this is not economical for smaller businesses. More on broker fees and charges here.
Small businesses therefore, unfortunately, end up with the no-sale-no-fee brokers or the brokers who charge a small advance fee of between a few hundred pounds and a few thousand.
No fee (or low fee) often comes with very high risks and a very low probability of sale. Why? It takes a lot of work to sell a business, whatever the size of the business, and if there isn't a large enough cash sum in it for the broker it just does not make sense for him to spend several hundred hours on your sale.
Please read that again. Contrary to what most business owners think, it takes several hundred hours if one is doing a proper job!
The main risk, however, is that this is a very dangerous end of the market. The UK has 1000+ brokers (including corporate finance and other firms who handle the sale of businesses) and we do have some of the best talent in the world. But at the "smaller deal" end of the market you're more likely to end up with brokers notorious for exploitative practices. Many owners of small businesses have ended up badly burned.
Even if the broker is an honest player, you'll probably just end up with your business sitting on the shelf for years! Why? Because it's not easy selling a small business. It takes a lot of smarts, hard work and creativity (in addition to the time investment required as described above).
The lower end brokers' modus operandi of posting the business online and sitting back ....doesn't work, and this is evidenced by the fact that over 95% of the businesses they take on will never find a buyer. For some brokers, the figures are even worse.
Many of the brokers taking on smaller business sell fewer than 2% of the businesses they take on. Do not believe all their boasts about how effective they are at selling businesses! They aren't. And here's how you can work out a broker's REAL "success rate" before signing up with them.
I've got some reviews of brokers here, but before signing up with any business broker, or business transfer agent who'll take on a sub £1 million business, my advice is to spend many hours, even days, researching the broker and speaking with their previous clients!
All is not as rosy as it seems and not half as rosy as these brokers make it out to be when they visit you to give you a valuation and tell you how brilliant they are.
So how do you sell a small business? If yours is a smaller business, and you want to discuss better ways of going to market, get in touch.
You choose the broker, don't let the broker choose you
Some of the best business brokers in the UK do not advertise at all! They are so good at what they do that they get a steady stream of clients referred to them from the likes of accountants and other professionals. In fact, and speaking as someone who matches businesses with brokers, I often find that these top brokers are very selective in which businesses they take on!
Some of the worst business brokers, on the other hand, run extensive call centre operations. They call every business owner in the yellow pages to say that they have buyers desperately looking to buy businesses! You've probably already had a call or two from brokers like these.
Their "eager buyers" are a myth. But, yes, they likely have an old and tired mailing list they send a newsletter out to every week!
Selling what is probably your most valuable asset - your business - is not to be undertaken lightly. It pays to carefully choose a partner to assist you with the highly skilled task of preparing and presenting your business to buyers, getting the right buyers in, negotiating prices and terms with them etc. It's not something you can leave to just anybody who calls himself a business broker. Not even if he's doing it for free. Especially if he's doing it for free (ie with no advance fee)!
Start with a good business broker directory (not a search engine)
The brokers who appear at the top of Google are not necessarily the best brokers. They are the brokers who've spent the most on Pay Per Click ads or the ones who've invested the most in Search Engine Optimisation.
The best brokers aren't to be found in the first 100 or so pages of the Google results! Some of them don't even have websites.
That's why you need to start with a good business broker directory (see our comments on business broker directories here). Of course no directory will tell you which brokers are the good ones, which brokers are right for your particular business etc., but we'll do that research later.
Remember to include transfer agents, corporate finance firms etc.
Don't forget that many firms providing broker services don't like to be called brokers. They call themselves corporate finances houses, M&A advisors, investment banking consultants, corporate brokers, transaction advisers, boutique investment banks and all kinds of other names. So if you limit your list to just business brokers and business transfer agents you'll be excluding some of the top talent in the UK.
Some of the large accountancy firms have divisions specialising in the sale of businesses, firms like Ernst & Young, PwC, Deloitte, KPMG etc. have dedicated "corporate finance" arms. Even the second tier accountancy firms have huge corporate finance operations - names like Hazlewoods, Mazars, BDO and about 50 others.
Then there are ex directors and MDs of top accountancy firms who've broken away and set up independent corporate finance firms that have become hugely successful - MCF, Nash & Co, Gambit, Argento, Strategic, JDC, Verde, West Hill, AGI, Atlas, Bishopsgate, Cavendish, Goldsmiths, Optima, Opus, Prism, PEM ... and over 100 others!
As with accountancy firms, so too with large corporate law firms. Many of them have branched out into handling the complete process of selling a business. Note that many of these firms can't be found in directories catering for business brokers, corporate finance firms etc.
The most comprehensive database of all UK firms assisting in the sale of businesses is our own database. Unfortunately, we do not make this data public, we use it internally to assist with the broker matching service we provide as there's a lot more to getting the right broker than simply having a list and phoning around.
Filter based on sector specialisation and client size
Many brokers will insist that sector specialisation is a non-issue, that selling a business is selling a business and it doesn't matter what industry that business is in.
My take is different. A broker who sells just fish and chip shops, for example, would have over the years built expertise in selling that particular type of business and in overcoming typical objections and hurdles buyers in that industry raise.
Further, for every fish and chip shop they've sold in the past they'll have at least 4-5 buyers who expressed interest in the business but did not proceed with a transaction ie. a bank of known buyers. A broker who deals with businesses in just one sector tends to have a good network of buyers interested in businesses in that sector.
But size is important, too. A broker who deals in £1m - £5m businesses (lower mid-market) wouldn't be best placed to sell a mid market business of, say, £50 million. Similarly, while it may win you boasting rights to claim that Goldman Sachs is representing your business, GS would be completely the wrong type of broker for a business with £2m in turnover.
If you want to get the best price for your business, you need to read our article on sector specialisation and finding a sector specialist broker.
Research each firm thoroughly
If you're doing this yourself, and have done all the research above, you should have a list of at least 40 - 50 names. Now comes the hard slog. You need to investigate each one.
You could start with reading reviews at various feedback and review sites including our own reviews. You could also try searching for each broker's name along with terms like "complaints" and "scam" to flush out articles, blog posts and forum threads complaining about the broker in question.
Sites like CEBTA.org are also good sites to visit as part of your research.
When verifying membership of professional bodies such as the International Business Brokers Association (IBBA) etc., do not assume that membership of a professional body is a green flag you can follow blindly. You need to verify what it takes to become a member of that body and/or whether it is given easily to anybody who comes up with a few quid for the rights to use their logo.
Once you're down to 10 or 20, speak with each one
Now that you're down to the last few, you can afford to call them and/or meet with each one. Let them pitch for your business. Take notes. Make no commitment.
While they'll be keen to shove fancy brochures in your hand, they'll be less forthcoming with a copy of their contract (engagement letter). Insist on one, and a quote for their services, and have these properly vetted by a competent lawyer.
It cannot be emphasised enough that some of those contracts look quite innocuous, but they've been worded to protect the broker's interests, not yours.
Carefully review all the terms, do not let them pressure you into a decision
Remember to never be rushed into a decision. Something this important can always wait a few days while you mull it over and/or get expert opinion.
Conclusion: If you wish assistance with finding the right broker, see what we can do for you. Apart from matching you with the right talent for your business, our service also saves you significant amounts in broker fees (far in excess of what we charge), keeps your potential sale more private, gets you better terms than you could get yourself, improves the price you obtain for your business and reduces the time it takes to find a buyer. Read more about our service here.