Selecting a business broker to handle the sale of your business is a hiring decision like many others—only it may be the most important hiring decision you make during the life of your business. Interviewing broker candidates is a critical part of the process. Here are some top questions to ask a potential business broker.
How Are You Paid?
Many business brokers work on a commission basis and are paid only when they conclude a successful sale. Others, however, charge retainers or fees that can add up as time drags on. Beware of brokers that charge upfront fees. When you hire a business broker, you enter into one of the most important partnerships of your career. Your business broker’s job is to help you exit your business with a successful sale that benefits all parties involved. A broker who only is paid when the seller is paid is motivated to find the best buyer and forge the best deal for your business.
How Do You Protect Confidentiality?
If a potential business broker can’t provide specifics about what they do to protect confidentiality until after a sale closes, walk away. Keeping your intentions secret throughout what can be a months- to years-long process of searching for and vetting qualified and interested buyers is critical to concluding a successful sale. If a whisper of your intention to sell your business escapes prematurely, your employees get nervous and start looking for other jobs, your customers look elsewhere for the products or service you provide, and your vendors might even start asking for payment early. Your business may be thriving, but rumors of a sale usually carry a negative connotation, justified or not, that your business is in trouble.
How Much Experience Do You Have?
Any business broker you select should have substantial experience closing successful deals. However, you also want to work with someone who can demonstrate past success selling businesses in your industry and geographical location. To help market your business and attract interested and motivated business buyers, your broker must understand the market and economic outlook for businesses like yours.
How Do You Calculate Value and Prepare a Business for Sale?
A business broker should have a sophisticated understanding of how prospective buyers would value your business and how they would see its growth potential in the future. An experienced business broker will know how to help you prepare a prospectus for your business that will answer a buyer’s questions about how your business will continue to thrive and generate profit after the sale. Your broker can work with your attorney, CFO, accountant, and tax advisor to organize your financial records, contracts, leases, and information on past or current litigation that will be necessary for any buyer to perform their due diligence.
These are just some of the questions to ask when deciding how to choose the right business broker. Other considerations, such as location and compatibility, will come into play. When you select a business broker, you will be spending a lot of time with that person. Trust and a sense of comfort with the person will be important, along with local knowledge and a national network of prospective buyers.