Selling a business: Do you need a broker?

Selling a business is a complicated time for any owner, it’s a lengthy, detailed process with many hurdles and issues to resolve before the desired result can be achieved. Particularly at the outset, the sale process can seem incredibly daunting.

As a result of this, and the overall complexity of the process, many sellers (especially those seeking to dispose of a business for the first time) will feel the need to engage a broker to help guide them through their sale, navigate the various stages and deal with any unexpected complications that occur.

However, while a professional broker can undoubtedly deliver great value in such key areas of a sale, they do also represent a significant investment and some argue that some of the services they offer can be carried out by a business owner willing to do it themselves.

Is a broker worth it, then? What advantages do they offer? And are there instances in which a seller would be better off handling things themselves?

What can a broker deliver?
Streamline the process
Perhaps the key advantage of engaging a broker is that the process of selling your business is significantly streamlined. You may have little experience of marketing a business for sale, selecting the right bidders and engaging in initial negotiations, but these are all things that brokers do for a living.

A good broker can be invaluable throughout these stages, representing your wants and needs to potential bidders, helping you to find the correct buyer and, ultimately, get the best deal overall for you and your business.

If you find the right broker, you might find that they will help you draw up a solid pool of pool of potential buyers, something that is often the trickiest and most daunting step for first time sellers. With this process done, you may have sufficient confidence to go on without their assistance.

Sale can proceed rapidly
In some cases, a seller will want the sale to proceed at a good pace, rather than becoming an overly drawn-out process. In such instances, getting a good broker on board early can help to speed up some of the initial, more problematic stages.

If you’re an inexperienced seller and time is of the essence for whatever reason, then a broker can help to ensure that your business sale starts in a timely fashion and doesn’t get bogged down before it’s really started, something that can happen all too easily.

Tap into expertise
Aside from the hands-on guidance that brokers can provide during the early stages of a sale, they also offer a wealth of knowledge, expertise and experience that can be useful to draw on for later stages of your disposal.

For example, once the initial steps have been taken, many brokers will have strong professional relationships and connections that enable them to refer you to lawyers, accountants and other professionals who can be vital in taking your sale to the next stage.

What if you proceed without a broker?
Cost savings
As we mentioned at the outset, engaging a broker to help handle your business sale represents a significant investment that will ultimately be reflected in the proceeds from the sale. If cost is a sensitive issue during your sale, then hiring a broker may be an expense that you simply can’t justify.

The counter-argument here is that brokers can help to draw up a better pool of potential buyers, which could prove valuable in ultimately securing a better price for your business. However, in sales involving a very small business or one that is in financial distress, the kinds of fees charged by brokers might be unfeasible, especially in an age where online platforms can help with various steps of the sale at a fraction of the price.

Cut out the middle man
For some sellers, having a broker to handle the early stages of a sale can be a godsend, especially if they aren’t confident or they don’t want to get too emotionally invested in the process, to the detriment of the eventual outcome.

For others, however, a broker might represent an unnecessary, costly barrier that gets in the way of them directly dealing with, getting to know and vetting potential buyers. Some sellers, particularly those that have built their own business and are concerned about its future, will want to speak directly with a buyer to gauge their motives and assess their capacity to take the business forward.

Having a broker involved could simply represent a hindrance in this regard. Furthermore, if the buyer does have a strong emotional investment in the business and wants to ensure that it is sold to a buyer that genuinely has its best interests in mind, engaging a third party broker that is simply thinking about getting the sale done may mean such considerations are not prioritised or properly respected.

Are they redundant?
In some types of sales, for example to a friend, trusted associate or family member, engaging a broker may just be a redundant, unnecessary expense. If a buyer or pool of buyers is already in place, then, of course, the sale will probably not require a broker.

However, even in other instances, a broker may not be strictly necessary. With resources like online listing platforms and other digital tools, many of the processes that brokers offer, such as marketing the business, selecting potential buyers and providing legal or accounting referrals, can be easily carried out by the seller themselves for far less cost.

Overall, while a broker can provide incredibly valuable services at the start of a business sale process, particularly for novice sellers who want or need professional guidance, they are not absolutely mandatory to an effective disposal.

In some cases, it may be advisable to consult with a broker, but in others they are simply unnecessary. When it comes to the issue of whether to engage a broker or not, each business sale should be looked at individually and rationally. In most cases, it should be fairly clear whether the services of a broker are required or not.