Choosing the Right Broker: A Critical Decision for Sellers

17 Jun 2024

Choosing the right broker is an important decision for business owners looking to sell. While many sellers have preconceived ideas about what makes a good broker, these beliefs can often be misguided. This article aims to debunk common misconceptions and guide sellers towards making an informed choice that aligns with their best interests.

Understanding the Role of a Broker

A broker’s role in the sale process is multifaceted, involving everything from initial valuation and marketing to negotiating and closing the deal. An experienced broker not only brings a wealth of knowledge but also a network of potential buyers. The right broker can significantly impact the outcome of a sale.

Misconception #1: Unrealistic Valuations

Many sellers are drawn to brokers who offer high valuations for their businesses. While it might be flattering to hear that your business is worth more than you expected, inflated valuations will only hurt your chances of a successful sale. Brokers who promise unrealistically high valuations often do so to win your business, but this can lead to prolonged sale processes and missed opportunities. Buyers are savvy and will recognise when a business is overpriced, resulting in fewer offers and likely driving away serious buyers. A realistic valuation is crucial for attracting genuine interest and achieving a successful outcome. Provided valuation expectations are sensible, the best approach is usually not to set a sale price but to market the business on an ‘offers invited’ basis, allowing you to benchmark valuation before accepting a deal.

Misconception #2: Low-Cost Brokers

The appeal of low-cost brokers is understandable, especially for sellers looking to maximise their returns. However, the adage “you get what you pay for” often holds true. Low-cost brokers often lack the resources and expertise required to provide personalised service and high-quality marketing. They often handle a higher volume of clients, leading to less attention on each individual sale. Investing in a premium broker can yield better results, as these brokers typically have the experience, resources, and dedication needed to achieve a successful sale. The hidden costs of a low-cost broker, in terms of time and potential deal losses, often outweigh the savings. A good broker should cover their fee several times over.

Misconception #3: Promises of Quick Sales

Brokers who promise quick sales may be appealing, but the reality is that rushing the process can lead to negative outcomes. Fast sales often mean less thorough vetting of buyers and inadequate preparation, resulting in undervaluation and increased risk of deal fallout. A broker who takes the time to conduct strategic marketing and careful buyer selection can secure a better deal. Sellers should be wary of promises that sound too good to be true and should prioritise brokers who focus on a methodical, well-planned approach.

Misconception #4: Minimal Involvement Post-Engagement

Some sellers believe that once the initial engagement is over, the broker’s job is largely done. However, the sale process is complex and requires continuous support. A good broker stays actively involved from preparation through to closing, offering guidance and managing negotiations. This ongoing involvement can reduce stress for the seller and improve the likelihood of a successful sale. Solicitors can sometimes approach contract negotiation in a very black-and-white manner, leading to misunderstandings. Good brokers can act as a backchannel negotiator to get the deal back on track. Sellers should therefore seek brokers who demonstrate a commitment to being fully engaged throughout the entire process.

What to Look for in a Quality Broker

When choosing a broker, sellers should prioritise honesty, experience, market knowledge, and a strong network. It’s essential to vet potential brokers thoroughly by asking questions about their experience, track record, and approach to the sale process. Sellers should also seek testimonials or references from previous clients to gauge the broker’s performance and reliability.

Conclusion

Choosing the right broker is crucial for a successful sale process. Sellers should look beyond superficial promises and focus on brokers who offer realistic valuations, quality service, and continuous support. By prioritising these qualities, sellers can avoid common pitfalls and achieve their desired outcomes. It’s worth investing time and resources into finding a broker who aligns with your long-term goals and best interests.

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