I recently ran across a situation that is not uncommon. A seller of a restaurant had hired a broker to represent him in the sale. A buyer appeared that the broker didn’t bring to the table. The seller decided not to tell the broker, do the deal himself and try to cut the broker out.
First, look at the morality of this situation
I know, it’s frustrating to hire a broker who’s supposed to bring you buyers and you end finding the person that wants to buy your restaurant. I get that. The problem is you probably didn’t negotiate that if you found the buyer the broker would earn no commission.
I hope that if you decide to sell your business you think of the golden rule when it comes to your broker. You want to treat the broker in the same way you would want to be treated. There’s a reason you hired the broker and it wasn’t just to find you a buyer.
You hired the broker for a reason
There are many reasons to hire a broker. When I sold my vending business I knew who the buyer was and I even wrote the offering memorandum. I wanted my broker to negotiate the deal for me. I wanted to have someone between the buyer and myself. My broker did a very good job with this and earned a healthy fee for doing so.
I believe the real value of a broker is not just finding you a buyer. I think the real value of the broker is to make sure you don’t make dumb seller mistakes. A good broker has worked on many deals. When you sell your business it’s probably your first or maybe second time down this road. You want an expert at your side helping you make sure you don’t make rookie errors.
In the case of my restaurant owner friend, he forgot to get a deposit, twice. The first time the buyer walked, and my restaurant owner was stuck with all legal bills he accumulated. The second time, the deal just dragged on, eventually closed, but it was nip and tuck for a while.
Use the expertise of your broker
If you’ve hired a good broker you can use their expertise. A broker should guide you through the sales process. They will know whether your buyer is legitimate. If your broker is competent they will be able to tell whether the buyer is serious and will help you make sure only serious buyers engage with you.
I highly recommend that you hire a broker and send all inquiries to them. You’re going to have to pay the commission whether you use them or not. It’s best to take advantage of the expertise your broker can bring to the table.
Make sure you’ve hired a competent broker
This is the most important step to take. Before hiring a broker make sure you’ve done your due diligence. Make sure you’ve talked with customers of theirs who have had successful deals and deals that didn’t go through. When you speak with people who have used the broker you’re considering ask those customers what they wish the broker had done differently.
Put together a set of traits you want to have in your broker. Write those traits down on paper. As you interview potential people to represent you and your business see how well these people stack up against your list. It’s not an automatic that you should hire the broker with the best score, but it should give you a pretty good indication of who to hire.
Remember, hire a broker you think is honest and you think you’ll enjoy working with. I find that I do my best work when I like those I work with and I think others do their best work when they like me. It’s only human nature that if we like someone we’re going to want to do a good job.
Oh, one more thing, listen to what your broker says. You don’t have to follow all of their advice, but you should have a really good reason for not doing so. That is if you’ve done a good job of hiring.
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