First, the cost of hiring a broker appears prohibitive. Professional business brokers charge between 10% and 12% of the selling price. Some brokers even charge a retainer that should be paid by the broker whether the business is sold or not. Businesses owners are generally not sure about whether they are ready to sell or not and do not want to spend money upfront. What if the broker is not successful in selling the business for whatever reason?
Second, confidentiality is a major concern to most business owners. What if the whole word knows that the business is for sale. How would the business owner be perceived by his employees, clients, suppliers, friends etc. The business could even suffer from the word going out that the business is for sale. Employees could have fears about their jobs and start looking for new jobs and leave the company. Clients might be scared that the company products or services could be lower in quality. New owners could for example increase prices or change the credit policy. This is very scary for customers who might want to diversify their source of supply and reduce their orders. Suppliers could also worry and start restricting their credit to the business.
Business sellers are generally scared that the business broker they have hired is not professional enough to preserve confidentiality. So what is the answer? Is a business broker worth hiring?
Unfortunately, there is no general answer to this question. Hiring the right broker is generally worth it but what is a right broker?
The quality of the relationship seller/broker is key to the success of the business broker hired in selling the business. Before the broker can find the right buyer for the business, he/she need to have a very good understanding of the business. If the seller/broker relationship is based on trust and honesty, then the seller feels confident describing his/her business in detail to the broker showing both the good and bad side of the business. A well informed broker can then find the buyer who would benefit the most from the aspects that make the business attractive and could handle the problem that the business has.
The broker/seller relationship aside, sellers need to hire competent brokers who have a good understanding of the brokerage profession, are ethical and enjoy their profession. It is also important to interview (and be interview by) the broker to ensure that the broker and seller can work together. Sellers need to understand that the broker also is taking a risk when listing their business, especially if the broker is only getting paid a success fee. If the business doesn't sell the broker would have spend tremendous time on the business without getting paid any fee.The interview will generally reveal to the seller whether the broker can preserve confidentiality or not. The fee however is a necessary cost to get professional help in selling the business. Good brokers are generally worth their fees since they can increase he selling price by more than their fees. Good brokers save a lot of the seller's time by doing all buyer qualification and screening and only present qualified buyers who have reasonable chances of completing a transaction to the sellers. The sellers can then focus on their business, making more money and preserving the value of their business until it is sold for the maximum price.
