Plenty Of False Advice On Business Brokers

Today’s awful post of the month goes to BusinessesForSale.com who’ve posted about How To Find The Right Business Broker To Sell Your Business.

It’s riddled with mistakes, bad information, biased information (biased towards the low-end business transfer agents and brokers who form the bulk of the submissions at BusinessesForSale) and downright nonsense.

I did try to post a comment but that blog’s commenting seems to be faulty so I produce the comment below instead (and for a better and less biased article on choosing a business broker, check out the Jonathan Lea Network article here.

Comments on the BusinessesForSale article:

Brokers are not necessarily the best option when selling a business. I know you have a directory of business brokers on your site, but in many cases the business is better off going to an M&A boutique, a corporate finance firm, an investment bank or other intermediary.

I maintain the UK’s most comprehensive data on brokers and I know the fees for almost every broker in the UK! With respect commission – the best brokers charge not 8% and above, they charge under 4%. The range you mention is for the crap end of the market, brokers dealing in the micro business end of the market, the ‘we’ll take anything on’ brokers.

I agree with your comments about choosing a broker who has sector specialisation, but brokers with sector specialisation tend to not take on the micro, tiny and small businesses you seem to be targeting with your post… and they tend to not call themselves brokers in the first place!

You recommend people ask a broker for his success rates. On paper that sounds good. In practice it’s a waste of time. Most brokers lie about their success rates (besides there are numerous ways to calculate success rate in this particular area!). There is no way for you to verify the broker’s claim about his success ration.

One of your suggestions seems to be that a broker will take payment only on the successful sale of the business. Only the absolute worst brokers, the dregs end of the market, operate a no-sale-no-fee policy. Any decent broker will charge a retainer to cover the huge amount of work involved in doing all the early stage work. The no-sale-no-fee brokers are also the most notorious and regularly get taken to court for exploiting clients. In fact, the whole business broker industry has a terrible reputation because of these bad eggs!