Important Questions to Ask Before Hiring a Business Broker
Business owners are often very surprised to find out how complicated the sale of their business can be. Organizing financial and other important information, finding prospective buyers, keeping the sale confidential until the time is right to inform employees and customers, how much information to reveal to a buyer at each stage in the process, and numerous other aspects of the sale need to be addressed. This is why sellers often turn to a business broker to help them with the transaction.
Working with a business broker is a smart idea. But that said, not all brokers are the same. You will need to ask some important questions to help ensure that you are teaming up with the right professional for your specific situation:
How Many Years of Experience do you have as a Business Broker: As we discussed previously, business sales are very complex transactions, and they require an extensive level of expertise on the part of the professional you are working with. Consider how long they have been in business, qualifications, and reputation in the industry. Ideally, you will want to work with a broker that has been in business for at least a decade or longer. If this is the case, they will have dealt with many of the more complicated scenarios that can arise, and they will be familiar with the best solutions to overcome these types of situations.
Everyone has to start somewhere. So, if you are talking with a broker who has less experience, at the very least they should be working with a team at a brokerage, and they should be working under more experienced professionals who can provide additional assistance when needed.
How much Experience do you Have Selling Businesses in My Industry: Some brokers may have a lot of experience, but they may not have dealt with selling a business like yours. Every industry is unique, and there are various nuances to each one. It is important for a broker to understand your business and industry, what common pitfalls might come up during a transaction with a business like yours, and who your ideal buyers are.
What is Your Method for Valuing my Business: A critical part of a business sale is setting the correct price for the business? Overprice it, and you will be sitting quietly for months with no interest in your listing. Underprice it, and you will be leaving money at the table when you sell. Your broker should use the correct valuation method for your type of business, which is another reason why question two is important. They will need to analyze every aspect of your specific business; which may include the value of your assets, a multiple of your net sales, what other businesses like yours are currently selling for, intangibles such as goodwill, and many others. At the end of the day, you will want your price to land within that sweet spot where you will attract strong interest and be able to maximize the value of the sale.
How Will you Market my Business to Qualified Buyers: Your broker should utilize the most effective marketing methods in order to get your listing out to the largest possible pool of qualified buyers. Ideally, they will also have a network of qualified candidates who are looking for a business like yours. The proven ability to market your business listing is one of the most important characteristics to look for when hiring a business broker.
Will you Help me Negotiate and Structure the Deal: When it comes time to entertain offers from prospective buyers, your broker should work closely with you to help with negotiation and to help ensure that the deal closes. Their experience in this area will be invaluable in coming up with ways to creatively structure a deal so that both sides are satisfied. Your broker should also be able to help you with the paperwork as you draft the purchase agreement. Keep in mind, however, that contracts signed between buyers and sellers should also be reviewed by an attorney in order to ensure that all legal requirements are met.