Important Questions to Ask Your Business Broker
Hiring a business broker to help you sell your business is probably one of the smartest decisions you can make. Firstly, it’ll free you up from having to do all the paper; trust us, you’re dodging a bullet here. Then, you can also have the assurance that your business sale will be done properly and legally.
While this is good, what happens if you choose a bad business broker? Well, we’re not saying that it’s impossible, but if you do your due diligence when choosing a business broker, it isn’t likely. In this article, we’ll cover some important questions to ask potential brokers to help you find the right one.
1. What experience do you have as a business broker?
For the first question, you want to gauge how much experience they have as business brokers. By asking how much experience they have, you provide them with a broad way of answering. Key answers that you’re looking for are how long they’ve worked as a business broker, the extent of the experience, and what industries they’ve been working in.
2. How did their last sale go?
Ask them about their last transaction, particularly what the asking price was and what they were able to get after closing the deal. Usually, a proficient business broker when evaluates your business and sets an appropriate price that doesn’t need much changing. However, we know that the business world works with compromise here and there. But you don’t want a broker who’ll drop the price too easily. So, understanding how they negotiate around the price and whether they get you the asking price or not will tell you a lot about how they function.
3. How long does their average transaction take?
Some business brokers are great at closing sales with a good turnover time. However, others might drag it out over a few years, which isn’t ideal. So, ask them how long their average transaction takes. You can ask them to give you examples, for instance, maybe of their last two or three transactions with a similar business, to see how long yours might be. Generally, a transaction can take around six months or longer to close.
4. How many sales did you close last year?
Questions like these might not get answered, but if they’re willing, ask them how many business transactions they closed last year. Broker companies that have more manpower might have a much larger list, showing that they can handle multiple deals at a time while offering you the attention needed to process your transaction well. Others might focus on less, aiming to give their individual attention to a handful of clients. This will help you understand which broker is better suited to your business. If you have a common business type, then brokers who handle multiple clients and have many sales might get your sales through faster.
5. Where do you find buyers?
For some, finding the right individual to take over their business is a vital component of the sale. So, with that in mind, ask your broker where and how they plan to find potential investors for your business. Often, brokers will have their own network of investors to whom they’d reach out first.
However, good business brokers will go out of their way to contact other businesses in the same industry that they know are looking to expand and invest. They’ll identify them, approach them with the option, and take things from them if they’re keen. This approach ensures you get the buyer you want and not someone who’ll strip your business for parts.
6. What’s your process for finding serious buyers?
In the sales world, there to kinds of people, those who are interested in buying but are on the fence, and those who are serious about buying and are all in. While caution is helpful at first when looking to invest, it doesn’t help both sides when one needs a sale. So, ask you broker how they find serious buyers and vet them to check that they’re able to put their money where their mouth is.
Generally, your business broker will do a background check on the potential buyer, checking their work experience, financial ability, character, reputation, and fit for your business before they move further with the sale on your behalf.
7. What is your take on this deal?
Ask your broker what cut they’d be getting from the sale. Usually, business brokers get a standard 10%. However, they might opt for a retainer fee instead of waiting for the deal to go through. Don’t fret if they do opt for an upfront retainer. If anything, this shows you that they’re serious about your business. They also do this to ensure that you don’t back out halfway through the deal and leave them hanging dry. It’s a way for them to ensure they’re working with those who are serious about selling their businesses.
Final Thoughts
Working with a business broker is the best way to sell your business and ensure everything is done right. Remember to be courteous and respectful when you ask these questions. Hopefully, by asking these questions, you will get an idea of whether or not the business broker you’re meeting with is the one for you.