Critics point to certain industry practices as deserving of that less-than-stellar image. For instance, says Fairley, "An unethical broker will say, 'I can get you 10 times EBITDA' [earnings before interest, taxes, depreciation, and amortization] just to get the client. Then when no one wants it, the broker comes back and says, 'I can get you two times.' "
Another controversial practice: About 25 percent of business brokers charge an up-front fee of 1 percent of the sales price, which should come off of the commission. While some observers see nothing wrong with this practice, it is illegal in about 20 states.
An ethical, experienced broker will come to the table with a database of qualified buyers; will qualify new buyers; will help the seller get financials in order; will write a thorough and persuasive offering memorandum and market the company; and will help the seller choose a buyer that's right for the company.
For many entrepreneurs, selling a company is akin to placing their child for adoption: Founders want a buyer who will nurture their baby. Like many sellers, Jolly Higdon feared his employees could lose their jobs under a new owner. His broker, Godsey, found a group of pilots who had the experience to grow Higdon's company and who committed to employing his people. Godsey encouraged Higdon to take the deal, even though the offer was $500,000 lower than a competitor's. Higdon agreed that it was the right thing to do. "You take care of the people who take care of you. I wanted to make sure that the folks on board with me would remain on board."
On the eve of his sale, Higdon was tired but happy, looking forward to time with his grandkids. And, he says, he and his wife will travel the country—but not by air. "I'm going to see things, touch things, and smell things on the ground for a change."
