How To Choose The Right Business Brokers To Sell Your Business?
This page is about choosing a business broker to sell a small business (under £500K in net profit per year).
Larger businesses, so called 'mid-cap' businesses, are not typically sold by business brokers. They require a higher level of skill and are typically handled by corporate finance firms, M&A firms, transaction advisory firms and others (though some business brokers do try and bid for those instructions). We have a detailed page on how selling mid-cap businesses is different.
If you own a mid-cap business, the best way to choose a broker would be to have us assist you choose, from the 1000+ UK firms, the ones that are best matched to the sector, size, geographical location etc., of your business, and fine tuned based on fees, fee structures, contractual terms and other criteria you discuss with us. Let us match you with the right expertise.
For the smaller businesses, here are eight steps to take to choose the right business broker:
Step1: Is it really a business broker needed for the sale? (Brokers are not suitable for one man bands and other very small businesses! Those businesses are better sold by the owners themselves - a DIY sale);
Step 2: If large enough for a business broker, the client needs to ensure they choose the broker, not have the broker choose them;
Step 3: Start with a good business broker directory (not a search engine);
Step 4: Include transfer agents others who sell businesses, not just brokers;
Step 5: Find sector specialists, experts in selling business in a specific industry;
Step 6: Reseach each firm thoroughly looking at, for example, their entries in review and feedback sites; professional memberships etc;
Step 7: Once down to 10 or 20, the business owner can speak with each and get a copy of their contract plus their fee schedule and
Step 8: Carefully review all the terms, and not get pressured into a decision.
Decide whether using a broker is right
Business brokers are not suited to the sale of very small businesses. If a 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 taking that business to market.
The reason is simply that, with micro businesses, there is just not enough 'meat on the bone'. Selling a business is a far more time consuming job than most small business owners appreciate and no decent broker would take on a mandate for a business making £50K or £100K a year. This is for two reasons:
1. These businesses are a lot more difficult to sell and the success rate is less than 20%. Yes, 4 out of 5 of these businesses will fail to sell. For many brokers, it's under 10%!
2. Out of the rare businesses that do successfully sell, the price tends to be pretty small and a commission/success fee, as a percentage of that price, doesn't excite any broker.
Small businesses will therefore get turned down by most competent brokers and they, unfortunately, usually end up with the most useless brokers in the market (and these useless brokers includes some 'big name' and 'well known' national players)! What typically happens is that the client pays an advance fee, the broker prepares a brochure and posts some online ads and ...well, that's it! Nothing further tends to happen.
In a recent analysis of the accounts and data from the UK's largest business broker firm, KBS (Knightsbridge), we discovered that they sell fewer than 10% of the businesses they take on (our review and analysis of the KBS figures is here). We are not picking on them; it's the same story with many of the others.
There are also business brokers who charge no upfront fee. No fee (or low fee) often business brokers / business transfer agents are the source of the most complaints in the industry.
The no-fee brokers occupy a very dangerous end of the market. Many owners of small businesses have ended up badly burned when using these brokers. No fee doesn't mean no risk for the client. Their contracts have many traps for the unwary.
Even if the broker is an honest player, the business usually just ends up sitting on the shelf for years! The lower end brokers' modus operandi of posting the business online and sitting back ....just doesn't work, unfortunately.
Do not believe any boasts about how effective they are at selling businesses! Many quote success rates of 80% or 90%! Here's how you can work out, for yourself, a broker's REAL "success rate" before signing up with them.
We'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, our 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
The client should choose the broker, not have the broker chose them
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.
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.
These are brokers who've found you. Not because you're a fantastic business, sorry to say, but because you happen to be a business. They call everybody! Our advice is to ignore these desperate cases who hound businesses to list with them.
Instead, what the wise business owner does is roll their sleeves up and get down to doing some research on business brokers, as you are doing here, and selective a few of the best ones to contact.
By the way, the hard sell brokers often claim they have many "eager buyers" on their database. That's probably not true. What they usually have is an old and tired mailing list of buyers who've, years ago, bought a business or moved on to something else.
When selling what is probably a vendor's most valuable asset - their business - it pays to carefully choose a partner to assist with the highly skilled task of preparing and presenting the business to buyers, getting the right buyers in, negotiating prices and terms with them etc. It's not something that one can leave to just anybody who calls himself a business broker.
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, accountancy practices and others
Many firms occupied in the selling of businesses don't call themselves business brokers.
They call themselves business agents, business transfer agents, business sales agents etc. There are also many accountancy practices who take on business sale mandates. If limiting the search to just business brokers and business transfer agents, it'll be excluding some of the top talent in the UK.
Then there are ex-directors and MDs of accountancy firms who've broken away and set up independent firms that have become highly successful at selling businesses. These can't be found by searching business broker directories at the major business-for-sale marketplaces.
However, we have a tip below.
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, but you can access some of this data at this broker directory on our sister site.
Filter based on sector specialisation
That is not necessarily true. 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.
The same applies if they are specialists in selling hair salons, post offices, convenience stores, small SaaS/tech businesses or any other type of micro-business.
A broker who deals with businesses in just one sector tends to have a good network of buyers interested in businesses in that sector. The broker will also be more familiar with multiples / valuations in that sector and how to get better prices for businesses in that sector.
Research each firm thoroughly
Business owners doing this themselves you should have a list of names. Now comes the hard slog - investigating each one.
One could start with reading reviews at various feedback and review sites including our own reviews. It's also worth searching for each broker's name in Google 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 worth visiting as part of the research.
Membership of a professional body, such as the International Business Brokers Association (IBBA), is not necessarily a green flag to be followed blindly. One needs 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 down to 10 or 20, speak with each one
When a business owner is down to the last few, s/he can afford to call each one and/or meet with them and hear what they have to say. Taking notes at these meetings helps. What's to be avoided is making a commitment at that first meeting.
While they'll be keen to shove fancy brochures in the prospective client's hand, they'll be less forthcoming with a copy of their contract (engagement letter). Some need to be pressed before they'll produce one and produce a quote for their services, It's worth getting the contract properly vetted by a competent lawyer. Some of these contracts can be quite tricky. Also, as they are B2B contracts, business-to-business, there is no 14 day cooling off period as there is in contracts with domestic customers.
Even if the contract looks quite innocuous, they've been worded to protect the broker's interests, not the client's, so it's worth a bit of negotiation.
Clients need to carefully review terms and not get pressured into a decision
Filter, filter, filter.
It's best to never be rushed into big decisions, of course. Something this important can always wait for some mulling over and / or getting third party opinions (the business accountants may be able to provide some useful input here).
Conclusion: On the smaller businesses, sub £1m or £2m in t/o, our advice is to not bother with a broker. A fairly clued up business owner can handle the sale themselves if they bother to do some detailed research first. In fact, with the smaller businesses, there seems to be a better chance of sale if the owners do it themselves. There is extensive information on this site to assist and there is also paid-by-the-hour consultancy available.