Selling a business is serious stuff and shouldn’t be taken lightly. When only 20% of all businesses listed ever sell who you choose can mean the difference between success and failure. Here are 10 Questions to start with when interviewing your broker:
10 Questions to Ask Your Business Broker before listing with them
1. How many deals have you done in your career and how many year to date? Sales people measure results, and the sale of your business is no matter to be handed off to an amateur or friend. Results matter!! An average broker should do 10 deals a year at a minimum….otherwise they aren’t making enough to properly capitalize the advertising needed to sell your business. Keep in mind only 20% of all businesses listed sell….if the broker you choose isn’t doing volume you are risking the likelihood of your selling the business.
2. How often do you co-broker? Believe it or not most business brokers don’t co-broker…its stupid, damages the client and in the long run hurts them as well but, greed does funny things. The average business broker co-brokers less than 20% of the time. The reason is they want the lions share of the commission. In the long run it’s a dumb business decision for them but given that most brokers are out of the business in 2 years its irrelevant to them. The greater damage is to the seller. If the broker isn’t working with other agents then he or she is not driving competition and subsequently your getting a lower price and not truly being marketed in the open exchange! Couple this with a low volume broker (item 1) and you are severely impacting your likelihood of selling.
3. How much are you spending on marketing my business? The answer should be quick and accurate. Think about it…a business broker is supposed to be a sharp financial business person. If he or she doesn’t know the economics of their own ad spend then how are they going to intelligently market and sell your business. The lack of answer here also is an indicator that the broker may simply be a lister …..and not a deal maker!
4. Do you have a specialty? Often brokers end up having specialties…it’s a function of success and a indicator that they are good sales people. Your choice of a broker should be on who is the best business broker not that they have ever “turned a wrench as a mechanic” and thus know what its like to be a automotive shop owner……the skill of selling businesses is what matters not the affinity they may have to your particular business.
5. How big is your firm? In business brokerage size matters. Deal volume, Average commissions, and Gross sales dollars translate into the ability to properly move your listing. Sole proprietors may give you the warm and fuzzy boutique feeling but you need to ask yourself, “what will happen if my broker gets sick, goes on vacation, etc?” Who is going to service the listing and the buyers….remember it takes about 12 months on average to sell a business and you looking to be one of the 20% that sell. SIZE MATTERS
6. Can you show me the comparable’s for my business? Just like in real estate, business brokers can pull comps and show you apples to apples comparisons to your business. Keeping in mind that only 20% of businesses sell you need to know exactly what the market looks like….Your broker should deal in reality and not blow smoke at you regarding your valuation.
7. Will I have to hold paper or do seller financing? Statistical Fact….when you don’t offer owner financing on your listing you decrease your selling likelihood by 40%. In addition, banks generally don’t lend money…bank lending represents less than 1% of the total financing mechanisms in the small business sale market….this is not recent data due to the recession….its always been this way. So if your broker doesn’t tell you this they are lying or at the very least being honest through omission. This is a big financial decision…use someone who is honest and tells you the truth.
8. How long do you average to sell? The industry average is 12 months, your broker should be able to tell you his or her average…keep in mind that the seller has a large element of dictating speed by what terms they set.
9. What websites are you on and how do you market my business? This gets to economics…if they give you three names…they are a lister that will throw a listing on an mls….a solid broker should thoroughly and in a detailed manner be able to list for you the marketing efforts, tools, websites (there are more than a dozen) and tactics they employ to get the deal done.
10. What is your commission? You will note this is last. Frankly because that is where it belongs….you would not ask a doctor about fees if your life was on the line and a business sale is not a simple procedure. Cheaper doesn’t get you anywhere and if your looking for a broker who will get it done, spend on advertising, and work with other brokers your going to pay between 10 to 15%.