By Scott Hogan-Smith, Director and Chartered Accountant
When undertaking the sale of your practice it is common to add a business broker to your advisory team to hopefully ensure a smooth sale process and to allow you to keep focused on the running of your practice. In many ways the business broker can make or break the sale process so this appointment, even though it is a one-off, is a critically important one. Given this importance, the obvious question our clients ask us is, “What makes a good business broker?”. We’ve distilled the answer to what we look for in a broker for a client’s business into the acronym “TAF”, which is short for:
Below are some of the key questions we ask of brokers to get a sense of whether our clients should use their services. Also keep in mind that your fellow practitioners, along with your accountant, will have had experience in dealing with different business brokers so we encourage our clients to speak to their colleagues and share their experience once the transaction is complete.
This is the most difficult quality to pick but generally speaking their reputation will precede them. If the broker has a reputation for being fair and accountable then it is more likely they will be trustworthy. Veterinarians interact with people of differing personalities every day so we generally advise our clients to follow their instincts once they have checked on the broker’s reputation and assessed their ability to be fair and accountable. We also encourage our clients to meet more than one broker, time permitting, so they can compare the personalities of the brokers and their approach to the transaction.
In any professional relationship where you, the practitioner, are paying for advice, the broker has to be accountable to you in terms of:
- Do they return your telephone calls and emails?
- Have they laid out a strategy to market your practice for sale, and identify/screen the right buyer for you?
- Does the broker interact with and support your accountant and lawyer as part of the transaction? Does the broker actively engage with them to ensure the best outcome for you in the sale?
“Fair to whom?” I can already hear you ask. The concept of fairness in the context of what we look for in a business broker can be further refined by looking at:
- Fairness in relation to their services and charges – how much do they charge and what is the exclusive agency period? How do they value the practice and is that valuation marketable?
- Do they advance your position with courtesy and respect during the sale process while allowing for fair compromise on terms?
- What is their reputation in the industry and what do people on the other side of transactions to the broker think of them? Are they considered “fair” in their prior deals?
Overall, using a broker should relieve the stress a practitioner can feel when they are looking to sell their practice, so it is important to find the right one to add to your advisory team when the time comes.
This article is designed to provide generic information only and should not be viewed as a recommendation to act. Individuals should seek advice from a qualified advisor to ensure their actions are commensurate with their financial needs and requirements.