Business Broker Red Flags - Summary

Our industry is misunderstood at the lower end of the market. The fortune 1000 companies would not consider a capital event without engaging an investment banking firm. Smaller companies seeking a sale need the same kind of services, but with a fee structure that is more size appropriate.
When I see a couple of firms with a powerful marketing reach engaging in practices that hurt our industry, it ticks me off. Most of the firms that service the lower end of the market are hardworking, honorable people seeking to provide excellent value. Many of these firms are members of the International Business Brokers Association, IBBA. This organization sets standards for business practices and ethical behavior. They also have established an industry certification, the CBI, Certified Business Intermediary.
So as you consider the company you want to engage to sell your business, he is what you look for:
1. No big up-front fees, but monthly fees.
2. No promises of foreign buyers for companies under $30 million.
3. A period of exclusivity from 12 to 24 months, not 5 years.
4. A firm that actively sells your company using direct calling into targeted buyers, and not simply posting on business for sale Web Sites and mass mailings.
5. A firm that tracks and reports their sales progress to you bi-weekly with a status or pipeline report.
6. A firm that is a member of a professional association like IBBA or M&A Source or a local or regional business broker network like MBBI.
7. A firm that at the appropriate time will introduce you telephonically to two of their reference clients whose business they successfully sold.
8. A firm that has a principal that has passed their industry testing and has been issued a CBI designation.
9. An Advisory firm that has experience selling companies in your industry and understands who the targeted buyers are, the right contact, and the industry nomenclature. Finally they should understand your industry's unique valuation metrics and deal structures.
This is the most important contractor or vendor you will ever hire for your business. Your economic future depends on the success of this engagement. Think of other major purchase decisions you have made for your company. Be every bit as rigorous in making your selection of an M&A advisor.