Last week we talked about red flags in a potential buyer. There are also important things to look for when deciding who you will be working with to find a buyer. Let’s take a look at three major red flags.
1. They make your skin crawl.
This may not be the most obvious factor when it comes to finding the right broker or investment banker to help you sell your business, but it is vital. This person will be like your realtor; you’re going to be stuck with them for a long time. If you don't enjoy the time you spend with them, find someone else, someone you’re going to want to work with for the long haul. It might be tempting to think you can just cringe your way through it, but hold out for someone you get along with easily. It will make the entire process easier.
2. They don't have a proven history.
References are key. A good broker is going to have a track record of success stories with former clients who are willing to share their experiences with you. If they can't supply you with these references, no matter their reasons, pass. Keep looking for someone with a glowing history of happy clients.
When a potential broker or investment banker does hand over their references, follow up. A list of names can be compelling, but it's not enough when you're preparing to entrust this person with what is likely the biggest asset you own. Call their references, ask detailed questions and learn everything you can about the experience other business owners had. Find out how the broker/banker went about representing other companies. Did the transaction go well? What was it like working with this person day in and day out? Were they professional? Did they know the business' industry thoroughly? Did they get to know the individual business before moving forward to sell it?
3. They promise what they can't deliver.
When you're investigating a broker or investment banker, find out about the price they promised other business owners and whether they were able to deliver on that promise. If they set the expectation for a high price and then failed to deliver, this is a red flag in and of itself. Anybody you work with to sell your business needs to have a solid awareness of the factors which will affect the final offer. While a good broker/banker will work hard to get the best price for your business, they will also manage your expectations from the start based on reality.
Don’t work with someone who can’t help you set accurate expectations and then achieve those expectations. You want a professional who can tell you what your business will sell for and then go out and help you sell it for that amount.
The bottom line
Selling a business is a complex process and your broker or investment banker will be finding potential buyers, coaching you through the process and more. You need a true professional in your corner, someone you can trust. Do not go with your gut on this one. Do the research. Vet your representation and don’t move forward with someone before you're confident they are the best fit for you.
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