Mind Your Business: Why Should I Pay a Broker?

By Steve Michaels

July/August 2009

Q.  I want to sell my business myself.  Why should I pay a broker?

A.  The old adage from Abe Lincoln states: "A man who represents himself has a fool for a client."  This is also true for anyone who represents him or herself while trying to sell his or her business.  A more mature and experienced negotiator will take advantage of you and make you think that you got a good deal in the process.

You, as the owner and seller, are too close to your business to negotiate from a position of strength.  Tactical comments about your business are made to lower the price and can be taken personally or blow the deal.  By using an intermediary, such as an attorney or broker, you put a buffer between you and the buyer, thus balancing out the position of power.

All negotiations arise from weakness.  Do not confuse serious negotiations with management skills.  They are different.  A manager should not be in the room during a series of tough negotiations.  However, a skilled negotiator is crucial when money is on the table and your future is on the line. 

Small business owners are typically poor negotiators; that is why they are small.  Larger business owners are great negotiators, which is why they are large.  Remember, the buyer is not your friend.  It is common for the buyer to initially flatter you with compliments about your business.  Flattery tends to soften you so you'll drop your guard as you leave little tidbits of information that will aid the buyer in their negotiations, resulting in a lower price and less favorable terms.  Sometimes the buyer may state that certain multiples are industry standards and tell you that your business is not worth what you want.  The buyer may also assure you that because of his or her years of experience in purchasing businesses all deals are done a particular way - that is, their way.  As a seller with less negotiation experience, it is easy to fall for their pitch and sell your business for a price way below what it is worth.  Having someone experienced in these matters makes all the difference, plus it gives you "peace of mind," knowing that you are getting the most return from your many years of hard work.

Steve Michaels is a business broker with TAS Marketing and can be contacted at 800-369-6126 or tas@tasmarketing.com for questions.