How To Hire A Business Broker
by North American Alliance of Business Brokers
There are many areas of a contract offered by a business broker that you should be aware of. You should always have a written agreement with the business broker – commonly referred to as a Listing Agreement like real estate.
There are terms and stipulations in an agreement that you should understand.
- The exclusivity of the agreement. An exclusive agreement provides that the business broker under contract is the only business broker authorized to sell your business for the time period allotted. Yes this protects the broker but it also protects you. A business owner under Non-Exclusive agreements opens his or herself up for litigation should two different brokers work the same buyer – assuming both brokers have followed proper disclosure processes. More so, a broker with an exclusive will work harder on it than a broker doing non-exclusive agreements.
- The length of the agreement. Normal lengths of listing agreements range between 9-12 months. Some agreements can be reduced to 6 months provided there are extenuating circumstances. BEWARE of the business broker offering a short term agreement with a retainer or other up-front fee. This allows them to collect money from you without having to obligate to a long term agreement.
- The Fee for selling the business. See # 8 above for a break down of fees. The business broker’s fee is NOT negotiable under typical listing agreements. BEWARE of the broker who offers to negotiate their fee – this type of broker lacks the confidence and drive to sell your business.
- Understand and review ALL other contingencies built into the listing agreement. Have the broker explain it thoroughly and – if in doubt – have your attorney look it over.
Hiring a good business broker is the most important thing you can do in selling your business. Like all other businesses, there are good and bad business brokers. You should feel comfortable with who they are and be comfortable with how they have represented themselves. If they refuse FULL DISCLOSURE – that is they do not provide written materials to back up their services then walk away!
BAD BUSINESS BROKERS CAN DESTROY THE PROCESS