Choosing and hiring a broker

The short version

• Talk to two or three brokers before you choose.
• Judge them on recent closed sales like yours, not on listings or promises about price.
• Read the engagement agreement closely, and have your M&A attorney read it before you sign.
• Negotiate the term, the exclusions and the tail before you sign. It is harder after.

What to look for

• Closed sales, not listings. Ask how many businesses they sold in the last two years, at what size and in what industries.
• How they find buyers. Their own list, other brokers, listings, direct outreach. Ask for specifics.
• How they screen. Ask what a buyer must show before learning your name.
• Who does the work. At some firms the person who signs you is not the person who runs your sale.
• References. Ask to speak with two or three owners whose businesses they sold.
• Licensing. Confirm whatever your state requires.

Be careful with the [broker](/learn/reference#business-broker "A person or firm paid, usually a percentage of the sale price at closing, to value a business, prepare the materials, find and screen buyers and manage the process. What a broker does and does not do is its own piece.") who promises the highest price. A price quoted to win a listing is not a price a buyer has agreed to pay.

The engagement agreement

The agreement between you and the broker is often called a listing agreement or engagement agreement. These are the terms that matter most.

• Term. How long the agreement lasts, and how either side can end it.
• [Exclusivity](/learn/reference#exclusivity "A period, usually set in the letter of intent, during which the seller agrees not to negotiate with other buyers. It gives the buyer time to complete diligence and arrange financing without the deal being sold out from under them."). Whether only this broker can sell the business during the term. Most agreements are exclusive.
• Exclusions. Buyers you already know, named in writing, who are left out of the fee or pay a reduced fee.
• The fee. The rate, the minimum fee, any retainer and what counts as the sale price. Lesson 2.3 covers these.
• The tail provision. How long after the agreement ends a fee is still owed, and for which buyers.
• Expenses. Which costs are billed to you, such as marketing or travel, and whether they have a cap.

Your M&A attorney should read the agreement before you sign it. Every term is negotiable.