Selecting a Brokerage & Consulting Vendor

How to Select a Business Broker

The decision to buy or sell a practice marks the next step on your professional horizon—and the transaction process can be greatly impacted depending on the quality of the guidance you receive. Therefore, we want to help ensure that your personal and business goals are met, and that your experience is a positive one.

To that end, we’ve prepared a list of questions you can use to evaluate business brokers when you are looking to sell or buy a firm. Use them to guide your conversation with the vendors of your choice. Their responses will help you determine the best fit given your particular situation and goals, and may help you avoid firms that consistently overpromise and under deliver.

Broker Evaluation Checklist – Selling

1. Industry qualification

Specialty brokers focusing on tax or accounting practices with a record of success will have the most knowledge of current market trends and experience working with professionals like you.

When we say record of success, we believe the firm should have consistently sold a significant number of practices annually over the past five years to prove their ability to manage the transaction on your behalf and represent your practice in an experienced manner. This experience will lend credibility in all areas of their work, such as identifying and addressing both parties concerns; negotiating price and terms; assisting the buyer with financing; providing due diligence guidance; advising on transition; and bringing the transaction to a successful close.

In addition, you may want to check what associations the firm participates in and what licenses and certifications they carry. Associations may include NAEA, AICPA, state societies, IBBA, IBA, and CPA Leadership Group, among others. Licenses and certifications may include real estate brokerage license, MBA, CPA, Certified Valuation Analyst (CVA), Certified Business Intermediary (CBI), and Certified Exit Planning Advisor (CEPA), among others.

Do you specialize in selling tax or accounting practices? If not the sole focus, do you have one or more people specializing in this industry?
How many practices have you or your firm sold in the past five years?
What types of industry certifications do you have?

2. Business longevity

Brokerage firms that have been in business for at least five to 10 years will typically have foundational experience and some measure of success. That said, many new brokers fail within their first few years of business. For those that make it past this natural attrition period, many still can only afford to work part-time as a broker while they continue to build their business. This can result in a split focus that may be successful, but more often than not, undermines the quality and depth of service provided. In some cases it has even been known to create a conflict of interest, such as when the broker also operates an accounting practice in the same market as a client being represented for sale.

How long have you been in business?
Is this your sole focus, or do you have other businesses?

3. Company resources

Business brokers are highly skilled professionals who provide infrastructure and transaction support for the sale and purchase of companies. Successful brokers have access to a vast collection of talent in order to provide specialized services to their clients throughout the transaction process.

Do you have accountants, salespeople, marketers, and finance professionals on your team?
What type of services or support will they provide to me during the sale of my practice?
Do you have regional offices with staff that understand my local market?

4. Firm pricing

Engage the broker in an honest discussion about the worth of your practice and how to determine a realistic figure. Note that if your price is too high, buyers will not be attracted. Beware of brokers overvaluing your price to secure your listing.

How do you determine the price of my firm?
State what you believe your firm is worth and ask, “Is this realistic?” The broker should not provide you with a definitive conclusion at this point, but if you provide at least the following basic information for them to assess, they should be able to provide a reality check:
- Location
- Size (annual gross, number of clients, staff and partner/owners)
- Type of practice and services provided

5. The process

Good brokers will be able to summarize precisely what experience you will have with them. In short, what are they going to do for you? They should have a clear and defined process from your initial conversation through to the close of your sale. This should include how they will to interact with you, promote your practice for sale, identify and qualify buyer candidates, move the buyer and you from initial dialog to close, outline what your involvement will be at each and every step. Beware the broker that is going to charge you a significant fee but expect you to handle all dialogue with buyer candidates on your own.

What is your process?
What can I expect from your process?
How will you communicate with me throughout the process?
How many buyers do you currently have in your system?

Note: All brokers should have a database of “buyers”. ProHorizons has a database of 144,000 practice owners that we could claim are buyers, but they are not as we are not in dialog with all of them. Try to find out how many active buyers they have in their system. These should be candidates that have expressed an interest in buying through dialog with the firm in the past two years. For reference, ours hovers around 10,000 active buyers.

What methods do you use to locate qualified buyers for my practice?
How much involvement is required from me at each step of your process?

6. Confidentiality

Maintaining confidentiality is essential to retaining employees and preventing clients from looking for another practitioner prior to your sale. Any potential buyers should sign non-disclosure agreements before receiving detailed confidential or proprietary information about your practice (including your specific location and identity), and before meeting with you or entering serious discussions / negotiations with you.

How do you protect my confidentiality?
How will you identify / promote my sale and maintain my confidentiality?
What amount of information will be given to prospective buyers through the stages of the sale?

7. Qualifying buyers

Brokers should take responsibility to thoroughly assess how serious a prospect is about buying your practice, as well as consider how the prospect will fit within your existing structure and environment.

How do you qualify buyer prospects?
How do you address the following when qualifying buyers?
- Is the prospect really interested in buying at this time?
- Does the prospect have the financial ability to purchase this business?
- Will clients and staff interact successfully with the prospect?
- Does the prospect have the professional competence to service your clients?

8. Process duration

Many owners are concerned with how long it will take to sell their firm. Factors involved can include location, size and type of practice, and terms. Duration can be as short as 60 days, or, depending on the complexity, up to a year or more. To sell before the next tax season, consider beginning the process soon after the current season ends. This provides an adequate amount of time to evaluate your goals, identify the best possible buyer, secure favorable terms and complete the transition process.<

How long do you think it will take to sell my firm? While the broker will only be able to estimate at this point, provide at least the following basic information for them to make the estimate:
- Location
- Size (annual gross and number of staff, clients, partner/owners)
- Type of practice and services provided
- Desired price
- Desired terms

9. Broker terms

An agreement to engage a broker’s services should cover the length of the engagement and general terms and conditions, such as the fee being charged, when payment is due and whether the representation is exclusive or not. Discuss all required fees and what they cover in advance in order that you and the broker can focus on selling the business.

What are the terms of your contract if I choose to have you represent my practice for sale?

10. References

Selling a practice can be a strenuous process with challenges occurring throughout. Brokers with good references have developed a solid approach for managing these challenges and have handled them professionally enough to provide their clients with a good experience. Testimonials are of value, but you should request to speak with recent clients. When checking references, inquire about the complete experience and any details that concern you based on responses to the above questions.