Red Flags in Choosing a Business Broker

Choosing a good business broker is a vital part of selling your business and thus should be treated very carefully. Below are some of the situations that may trigger your suspicion (and for a good reason). Experiencing any of these red flags may indicate that your search for a business broker needs to continue.

The Broker Wants a Significant or Total Fee Paid Upfront

While paying a small fee upfront is becoming quite normal these days, however, the total fee almost always consist of an upfront fee AND a commission paid upon the sale of the business. A business broker assuring you that you may sell your business for much more than you expected may evoke a false feeling of relief but don’t fall for any hefty fees upfront. The chances are that you may never see such broker again.

During Your First Meeting, the Broker Says They Can Get Your Asking Price Higher

If something sounds too good to be true, it probably is. Setting a reasonable price for your business will be one of the most important factors of a successful sale and there is generally no need to overshoot the mark. In fact, most owners overvalue their businesses rather than undervalue. Having a business broker promising a higher price at the first meeting is, therefore, somewhat suspicious and may indicate their unreliability.

The Broker Doesn’t Have a Website

The broker’s competence can be partly judged by taking a look at their website (if they have any). Is the content up to date? A sharp broker will likely use this powerful marketing tool to create a favourable image on the Internet.

The Broker Doesn’t Seem Well Grounded in Business Valuation

A good broker should be able to clearly explain business valuation to their clients. If they fail to do so, they probably won’t be able to explain the proper worth of your business to a prospective buyer either. Make sure your broker is confident in this area.