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  • The 5 Characteristics of a Top Tier Business Broker

    Dec 21, 2021

    Many know that before I entered the business brokerage profession in 1994, my previous career path was as a college basketball coach.  My last coaching stop was as the top assistant at a junior college in the Jayhawk Conference where I recruited nationally top tier talent that for reasons ranging from grades to SAT scores to youthful misadventures were not offered the Division 1 scholarships their ability warranted.  Coaching college basketball superficially appears very different than being a mergers & acquisitions intermediary, but actually provided a wonderful training environment for many professional skills I use regularly as the President & CEO of the Pacific Northwest’s oldest & largest business brokerage, IBA, and a business broker who has successfully facilitated over 300 transactions in a spectrum of industries from Seattle to North Carolina and San Francisco to Boston.  These skills included the ability to sell intangible assets, what is more undifferentiated and intangible than a scholarship to a junior college; the strategic/cognitive prowess to assess a dynamic environment in real time and make decisions with win/lose implications; and the aptitude to create a team environment where people with diverse skills and personalities contribute to achieving a common goal.

    The proper evaluation of player talent is critical to success as a college basketball coach.  It is also fundamental to achieving a market to premium value sale price in a transaction employing best practices in a timely manner while maintaining an environment of confidentiality for a business owner wishing to sell their privately held company or family business.

    The following are the five characteristics I recommend entrepreneurs evaluate when selecting a business broker to sell their business.  In addition, I recommend interviewing more than one business broker during the selection process.  It is difficult to assess talent without comparison.

    Experience

    I tell the business brokers I train at IBA that the best way to learn this profession is through a “baptism of fire”.  There is no substitute for doing in this sophisticated, nuanced profession.  One of my favorite quotes from college basketball is one first credited to NCAA Championship Coach, Al McGuire.  He famously said, “The best thing about freshmen is they become sophomores.”  The same is true for business brokers.  It is my strong belief that until a business broker has successfully facilitated 3 – 5 transactions as the lead intermediary, they are in the “fake it until you make it” stage, or freshman year, of development.  Any interview of a business broker, should start with the questions how many deals have your personally facilitated and tell me about the last deal you successfully completed in my industry.  The information provided to these two questions alone provides good metrics for deciding which broker has the highest probability of achieving your transaction goals.  A secondary line of questions should relate to understanding the level of experience supporting the business broker at their firm.  Who do they have to go to for strategy ideas and with questions?  Watch any basketball coaching staff after a timeout is called to set up a last minute shot, traditionally you will see the head coach surrounded by their assistants brainstorming strategy before the head coach engages with the team.  This is done because multiple heads working a problem employing their combined experience is better than one. The same is true in facilitating a business sale.  I personally would be reluctant to engage with a one man show business brokerage firm knowing that no support system exists for that individual in the middle of a deal or if they have a health issue or go on vacation.

    Knowledge

    There is no substitute for knowledge in problem solving.  Business brokerage knowledge can be gained through reading, seminars, mentorship, and firsthand experience.  IBA, with its corporate culture emphasizing education, embraces all four of these learning pathways.  My team received the book, Selling with Authentic Persuasion (https://www.amazon.com/Selling-Authentic-Persuasion-Transform-Breaker/dp/1890427373), as a holiday gift this year. Excellent book written by Jason Cutter that should be in any salesperson’s library.  While other business brokers are drinking eggnog this holiday season, the IBA team will be learning how to enhance their sales skills for 2022.  In addition, we hold monthly educational seminars featuring attorneys, CPA’s, wealth advisors, bankers, and other professionals with the sole purpose of keeping our education current in the constantly changing environments of law, accounting, tax, bank finance, etc.  When I was a young basketball coach, I worked basketball camps for and learned from coaching legends including Roy Williams, Denny Crum, Rick Pitino, and Dana Altman.  The knowledge they shared with me could not be learned from a book or seminar.  It was personal and situation specific.  Mentorship is also critical in the development of a M&A intermediary.  IBA as a 47 year old business brokerage firm has a mentorship culture.  The IBA team beyond myself is blessed to include Curt Maier, IBA’s VP of Business Development, who was the owner of a business brokerage firm before joining IBA, Bill Southwell, who took a company public and was a lawyer prior to becoming a M&A intermediary at IBA, and Jeffrey Bryan, who first joined the firm in 2007 and is the lead broker in our transportation and construction divisions, as valued sounding boards utilized from the C Suite to the newest business broker.   Many times a solution is only available with relevant knowledge.  Anyone interviewing a business broker for potential representation in the sale of a privately held company should inquire about what they have been doing to keep their knowledge current and continue to learn items that could benefit their clients during the sale process.  It is also beneficial to engage a business brokerage firm who has institutional knowledge based on having navigated different economic conditions.  As an example, IBA is the only business brokerage firm in the Pacific Northwest that has operational strategies & a history of successfully facilitating deals in periods of inflation and high interest rates.

    Ability

    Many assistant coaches dream of being a head coach with the power, prestige, and financial rewards that come with the responsibility.   The University of Washington has hired top assistants (Bob Bender & Mike Hopkins) to Mike Krzyzewski, a five time national championship basketball coach at Duke, and Jim Boeheim, a five time Final Four coach with one national title, with aspirations that both would be able to lead the Huskies to the Final Four. Both Bob Bender and Mike Hopkins appear to be quality individuals.  However, neither achieved the success of their mentors.  I have developed numerous business brokers at IBA into quality intermediaries achieving strong six figure incomes as 100% commission compensated salespeople. Most of their success is because of their knowledge, experience, and superior skill set. None of these people would be a member of the IBA team, if they did not have a potential to be superior business brokers.   A percentage of their success is because of the knowledge, experience, and ability behind them at IBA.  Multiple times I have mentored business brokers only for them to form their own firms.  Unfortunately,  like Bob Bender & Mike Hopkins most of these individuals have struggled to achieve the team success they experienced at IBA.  If a firm is new to the market,  I encourage a line of inquiry into what has been sold under the new flag versus with a prior organization.   Steve Sarkisian can talk about winning national titles at USC as a member of Pete Carrol’s staff or at Alabama as an assistant under the leadership of Nick Saban, however he has struggled at Washington, USC, and Texas as a head coach.  Great football mind, but time will tell if he can be successful as leader of a college football team.

    Speaking of high performers, I would like to take a moment to recognize two colleagues, Pete McDowell and Dan Gibson, in the Seattle metropolitan mergers & acquisitions community who recently announced their retirement from the profession.   Both Pete & Dan were peers I respected and admired for their achievements.   If an individual selected Pete at RC Advisory or Dan at Exit Equity as a sell side business broker in a competitive interview process for intermediary services, I always wished them and their client well, confident they were in good hands. I will miss the two of them in the industry and will be jealous this winter of their warm weather locations in California & Florida. I wish the remaining teams at these firms continued success. I am always available as a resource. The industry is better when firms all strive to provide the best possible customer experience.

    Integrity

    Mike Krzyzewski’s Duke basketball teams have won more national championships than any other program during the last forty years, however court performance is only half the story.  Coach K’s program has also been exemplary in terms of graduating athletes, recruiting practices, and player development.  He deserves to be on the Mount Rushmore of college basketball coaches.  Someone to look up to and emulate in virtually every way, including his success in marriage, currently at 52 years.   Martin Luther King, Jr. famously said, people should be judged by the content of their character.  I believe this is also true for business brokers.  It is metric that I encourage every entrepreneur to assess when selecting a business broker.  The professional sale of a business creates a very close, short-term relationship with significant implications for the parties involved in the deal.  It is strongly recommended that an entrepreneur engaging a business broker interview multiple references to assess their knowledge, experience, ability, and integrity prior to executing a representation agreement.  Every year IBA sells companies for business owners as their second choice for professional representation because a business broker either over promised and under delivered financially or failed to successfully close a deal with a qualified buyer due to insufficient knowledge, experience, or skill.  Our door is always open to entrepreneurs in need.  There is no shame in giving another captain the helm when the other is failing to make forward progress or putting the ship on the rocks.

    Resources

    An often overlooked value a business broker brings to a deal is their Rolodex of resources.   Resources can range from a business attorney to draft/review agreements to a CPA to help mitigate tax implications of the transaction to a banker to finance the transaction.  A simple test of the resources of business broker is to ask for names of attorneys, CPA’s, or bankers.  Like references, those that have them easily provide them.  Those that do not, make excuses why they are not available.  As an example of the resources available to IBA clients, I share our blog ( https://ibainc.com/blog/).  The IBA blog was developed as a library resource for the entrepreneurial community.  It contains information on virtually every element associated with selling a company written by industry experts.  The bottom of the page also shares a small portion of IBA’s Rolodex, as it lists approximately 100 professionals who have contributed to this free community resource and collaborate with IBA in providing market leading M&A services.

    Selection of a business broker to sell your privately held company or family business is a BIG decision.  I encourage you to take you time and seriously vet parties.  If your business is located in the Pacific Northwest, IBA would welcome the opportunity to be included in your interview process.

    IBA, the Pacific Northwest’s premier business brokerage firm since 1975, is available as an information resource to the media, business brokerage, mergers & acquisitions, and real estate communities on subjects relevant to the purchase & sale of privately held companies and family-owned businesses.  IBA is recognized as one of the best business brokerage firms in the nation based on its long track record of successfully negotiating “win-win” business sale transactions in environments of full disclosure employing “best practices”.

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