Business Brokers: Acing the Interview and Getting the Listing
Finding the right advisors when selling a business can be a challenge. But it doesn’t have to be.
First off, most business owners will already have a relationship with a couple; an attorney and accountant for example. That’s a start – but only a start, because the RIGHT attorney and accountant are what’s needed.
The RIGHT attorney decidedly is NOT the owner’s divorce attorney or the one that keeps getting their kid off on various speeding charges. The right attorney is a “transaction” attorney – one with experience in handling the sale of businesses.
The same can be said of accountants.
Not all accountants have experience in the ins and outs of selling a business.
But what about business brokers?
Finding the Right Business Broker
Professional business brokers and M&A advisors are arguably the “captain” of the transition team. We’re usually the one calling the plays and bringing in the right players at the right time. Orchestrating the cast and sequences is our job. Having the right business broker will keep the process moving and help it stay on track.
But how does a business owner find the right broker?
The key is to interview a couple. And when business owners interview brokers, some of the questions they ask can be anticipated. As professional business brokers, we need to be prepared for those questions.
With more than 20 years in the business-brokering trenches, we’ve gone through this process with owners dozens of times and we know what questions we’re likely to get.
If you’re a business owner considering selling, this discussion will help you prepare some of the questions you should be asking brokers and advisors.
And if you’re a business broker, this discussion will help you anticipate some of the questions you’ll likely get – and to prepare your responses appropriately.
Question: “How will you handle confidentiality during the selling process?”
When selling a business, confidentiality is critical.
Not all business broker or M&A firms will have a very detailed, well-defined process for protecting the confidentiality of the businesses they’re hired to sell but failing to maintain the highest level of confidentiality is the fastest way for the market to know that a company is for sale, which is guaranteed to create problems for the owners with their employees, customers, and suppliers.
We have to be able to clearly explain to our potential clients that we understand how critical this aspect of the process is and what we do to ensure that confidentiality is maintained from start to finish.
In our Course, “Learn How to Value and Successfully Sell Businesses”, we describe the many facets of confidentiality and how to assure potential clients that we are able to maintain it. We also advise our clients how to handle a surprise phone call from someone inquiring about a possible sale.
Our course, “Learn How to Value and SUCCESSFULLY Sell Businesses“, teaches you how to value and sell businesses.
Become a Professional Business Broker…
Most importantly, we let our clients know that, if news that their business might be for sale gets out, it will be from a breach on their end, not ours.
Many owners have not thought about confidentiality or how important it is to the successful sale of their business. Properly explaining how – and more importantly, why – we focus on it, allows us to be seen as true professionals with our client’s best interest foremost in our mind.
Question: “What is the size of the transactions you usually handle?”
In our case, we work in the Main Street and Lower Middle markets. That is, businesses with transaction values of between $250,000 and $20 million (though some of our brokers handle smaller deals, especially when they’re just getting started). We are not – and have no intention of becoming – investment bankers competing in the $100 million market.
We tell our potential clients up front that this is the range that we’re most experienced in and that, if their business is larger, we’d be happy to refer them to a firm that has more experience with larger deals.
But there are millions of businesses around the world that fall into our size range. We recognize that we can’t and don’t want to be all things to all people – and I advise new brokers to adopt this position. It reflects positively on us if we refer potential clients to someone who can better serve them.
We’ve found that advising our clients about our self-imposed “limitation” enhances our credibility.
Question: “How will you market my business?”
The answer to this question depends to some extent on the business and is a subject covered in depth on our Course.
Is the buyer likely to be financial or strategic? Is it likely to be a private equity group or an individual – or another business?
Though there are common marketing components for most businesses that we bring to market, the type of business being sold will suggest to us the types of buyers we should target and that, in turn, will inform some of the marketing aspects that will be specific to a particular business.
That sentence is a general answer to the question of how you’ll market the seller’s business and we use some version of it before we ask the seller questions about the business. The answers the seller provides usually allow us to get more specific.
Answering in this manner is another way we buttress our credibility.
We’ve launched a coaching program specifically tailored to Realtors that want to sell businesses, business owners and to anyone that wants to become a business broker.
If you’d like to learn more, email me at jo*@Wo*******************.com
Question: “How will you value my business?”
This one is tricky because we have to realize that the business owner may be interviewing several brokers and it is not uncommon that one or more of them will try to flatter the owner with an unrealistic number just to get the listing.
When we have this discussion with potential clients, we go through the detailed process we use to value a business and we advise our potential client that we’re usually the bearers of bad news – because the owners of most small (and many not-so-small) businesses have an exaggerated opinion of their business’s value.
We abhor wasting our time. Valuing a business just to get the listing will almost guaranty that the business won’t sell. And getting a listing that is unlikely to sell is guaranteed to waste our time.
We advise all clients that we won’t take a listing that has not been valued by us or by some other qualified firm. And we charge for our valuations.
We also suggest that they separate the valuation assignment from the listing assignment. Though this might entail some initial costs, it will provide some significant clarity to the client about the quality and professionalism of the brokers being considered.
More information in answering this question is better than less – MUCH better! We’ve found that honesty and clarity in this single aspect of the interview goes a long way to establishing a broker’s credibility.
How to properly value businesses – and how to explain the process so that a business owner understands its complexity and importance – is covered in depth in about a dozen lectures in our Course.
Question: “What is the likelihood of finding a buyer for my business?”
This one is pretty easy because there are some pretty good statistics out there.
Anyone who has read this blog with any regularity over the past couple of years knows the low level of successful business sales and why that level is so abysmal. (Hint: it’s usually the business owner’s fault.)
Though there are more than a dozen good reasons that businesses don’t sell, there are only about five that are responsible for the vast majority of such disappointing results. And these five – mostly the result of decisions made by the business owner – are more likely to be avoided if they are explained to the potential client.
Finally, the big question is, how do we get paid?
Because that question covers so much ground, it needs a post by itself and that will be the topic of next week’s post.
The Bottom Line
Business brokers are sure to be interviewed by business owners when the owners believe it’s time to exit. That interview is likely to involve dozens of questions, many of which might be specific to the business.
But as a rule, the five questions discussed above will almost certainly be asked and we need to know how to answer them.
If you have any questions or comments on this topic – or any topic related to business – I’d like to hear from you. Put them in the comments box below. Start the conversation and I’ll get back to you with answers or my own comments. If I get enough on one topic, I’ll address them in a future post or podcast.
I’ll be back with you again next Monday. In the meantime, I hope you have a safe and profitable week.