Want to sell a small to medium-sized business? Companies with sales in the annual range of $5 million may struggle with where to turn for assistance. Brokers tend to specialize in either very small companies with annual revenues less than $1 million, or larger businesses with revenues well in excess of $5-$10 million. So what’s a small to mid-sized business to do? You still need a broker.
When You’re Not Small and you’re Not Medium
At around $5 million in revenue, a business is just on the edge of small and medium-sized. Brokers may not advertise to this market as much, but that doesn’t mean they’re uninterested. You don’t have to pick a broker who’s advertising their services for a business of your specific size or revenue. Simply look for the best fit. Begin your search by reaching out to 10-15 candidates. The wider your net, after all, the more likely it is to return a good catch.
How to Choose Your Broker
When you begin your search for a broker, you must first have a keen understanding of what the relationship entails. Your broker will be intimately involved in the sale, and in the operation of your business. So you need someone who understands your industry—or at least a substantially similar industry. Don’t get too fixated on the industry, though. Good brokers know how to market a wide range of businesses. You also need a broker who assures confidentiality with clear retainer agreements, and who is upfront about pricing.
It can feel overwhelming at first, but a broker helps you navigate the sale from start to finish. This ultimately may help your business command a much higher selling price with more favorable terms. So don’t shy away from spending a little money on a great broker.
So what are the characteristics of a good broker? Here are some things to look for:
• Deep and varied networking connections. Ask for references and talk to former clients. Many brokers won’t work with other brokers. You need to know that your broker is different, and able to work with a variety of people.
• Clear details about what you can expect. A good broker will be actively involved in the sale, and you should hear from them at least weekly.
• A short contract term. Brokers that offer shorter contract terms are confident in their abilities, which means they know that you’ll either extend the contract or close within the deal term. A good broker can get most businesses under contract within a few weeks to a month or so.
• A personality you can comfortably work with. Trust your gut. Do you like this person? Can you work with them? If not, try someone else.
Business sales are inherently confidential undertakings. While there are many multi-level listing services, none offer the right balance of confidentiality and access to qualified buyers. So even for smaller businesses, a skilled broker remains the best bet—though you may have some preliminary luck listing your business on several sites.