Choosing a Business Broker to Sell Your Business: 7 Questions to Ask
Selling your business is an important step in your career – almost as important as beginning it. Knowing how and whom to sell your business to is not a process to be taken lightly. Similarly, being in the market for a new business can be tedious. In fact, almost every article you will find online both buyer and seller will argue for hiring a broker because it is a lot to figure out on your own. The support from a broker means the buying or selling process is less daunting and does not interfere with the running of your business. Experienced, eager to help, and with a network of businesses for sale and potential buyers, it comes as no surprise why this is the most popular decision.
That being said, before you do hire a broker, there are 7 important questions to ask before moving forward.
1. What is your experience with selling and/or purchasing a business?
This question is likely the most important because the answer you want can be as vague or detailed as you wish. For instance, the question can cover general experience, but also specific experience in your industry. While you may think the most important thing is to find a broker with industry knowledge, that is somewhat of a red herring. What you really need is a broker who is trained and works at selling businesses full time. In addition, you may want a business broker who has access to resources and spends money on advertising for buyers.
2. What percentage of your income comes from commissions versus fees?
This is important for one simple reason: incentive drives behavior. You want to know how badly your broker wants to sell quickly or sell at the best price to the best potential buyer. Large upfront fees is an indication that they may not be good at actually getting deals done.
3. How do you value a business?
In a perfect world, you could sell your business for millions of US dollars. However, finding out what your business value is, is somewhat of an art not a science. But in today’s world, there is a vast amount of information that can give you a great idea of your value based on comps. Therefore, you want a broker who has access to sold databases and can show you what businesses like yours have sold for in the past.
4. How will you protect my confidentiality?
When selling your business, you do not want employees or the competition to know about the sale until you are ready. Employees can become nervous because of an uncertain future, and a competitor may try to use this information to take an upper hand. Confidentiality is key and should be handled by your broker. They will provide a non-disclosure agreement (NDA) from every prospective buyer. You should also review what to say if confidentiality is breached. For instance, Transworld also helps businesses expand through franchising. This could be a good cover for any leaks.
5. How many listings do you have right now?
Having broker who seems to carry few listings may seem great. However, you do not want one who is either part time or alone in the world. You want your broker who is part of a dynamic marketplace, that has lots of listings. That will create buyer traffic from all over the world and this will hopefully create competition for your deal.
6. How many qualified potential buyers do you have?
A professional broker will be a part of an organization with a network of potential buyers and sellers. This network will be equipped with vetted buyers to make the selling process more seamless. And you want a broker that has access to a buyer database that again can find brokers from all over the world.
7. Do they have access and connections to a skilled team of professionals?
Your broker should be the liaison between your business, the potential buyer, and other professionals you will need to get a deal done. They understand the complicated process once an offer has been made. A wise and professional broker will advise you to hire the right professionals once it is time for a contract to be drafted and/or signed. If they argue they can handle all aspects of the negotiation, they may not be as experienced as they say.
Transworld Business Advisors understands the importance of business purchasing and selling. This is precisely why our brokers are more than equipped to answer these questions and provide answers you will be comfortable with. If you are in the market for a new business or are preparing to sell yours, contact your local Transworld today!