Business brokers can play a crucial role in helping small and medium-sized business owners sell or acquire businesses. However, not all business brokers are created equal, and choosing the right one can make or break the success of your business sale or acquisition.
Here are four important questions to ask a business broker before you commit.
1. How will you protect my confidentiality?
Confidentiality is absolutely critical when selling a business, so it is equally important that you work with business brokers who have protocols in place for protecting that confidentiality.
2. How much experience do you have selling businesses in my industry?
Prioritize business brokers who have experience selling businesses that are similar to yours, whether in your particular industry or those with a similar business model. Some of the advantages of this are that the business broker will have valuable prior knowledge of the industry, and they probably have existing connections to buyers in that industry.
3. How many businesses of my size have you sold?
In addition to having experience selling businesses in your industry, it is important to consider whether the brokers have experience selling businesses of your size. There can be quite a large difference in the sale of a $1 million company versus a $25 million company, including the types of buyers that may be interested.
4. How will you value my business?
There are numerous ways to value a business and using a generic formula or rule of thumb is not an approach that often works well. Successful and experienced business brokers know that an accurate business valuation is complex, takes time, and includes reviewing a variety of qualitative and quantitative measures. Does your broker have the required education, experience, and skill set to provide you with a meaningful fair market value evaluation that will be accepted by prospective purchasers and their professional advisors.
What are the Broker’s qualifications, education and experience, and what professional associations do they belong to?
Do you select your Broker based on the awards they won (or paid for) or do you select your broker based on reputation, referrals, expertise, and experience. Make sure your broker is affiliated with a professional organization. Ensure the broker is licensed to operate in your jurisdiction and has relevant accreditations or memberships in professional associations.
Transparency and Integrity
Seek a broker who is transparent about their fees, the transaction process (how long will the process take and what services they provide), and any potential conflicts of interest. Trust and integrity are vital in this relationship.
Beware of the Ugly Broker
Like any profession there are good and bad Business Brokers and then there are the Ugly. Beware of the Ugly broker:
- Who isn't open about the details of a business, its financials, or its history.
- Who overpromises, who makes grand promises about how easy it will be to buy or sell a business at a certain price.
- High Pressure Tactics. A broker should facilitate the process and offer advice but should not resort to aggressive tactics to push a sale.
- No Professional References – Good brokers will be able to provide you with references from different professionals and clients familiar with their work.
Hiring a business broker can make all the difference in the sale of your business; take the time to ask these questions and find a business broker that will help you achieve the best possible outcome. Over the past 25 years, Ostir Business Brokers has completed over 400 transactions, the majority of which were in the $1 million to $10 million sales price range, and 90% were successfully completed within the agreed-upon time frame. If you are considering selling your business, contact us today for a confidential meeting – which will be without fee or obligation.