If you’re in the process of finding a business broker to help you sell your company, you must ask some questions before signing on.
Business brokers can help increase revenues and provide advice. They are also paid by commission. This means that they might not always have your best interests in mind.
This blog post will share five questions to ask potential business brokers when interviewing them about their services.
So keep reading whenever you’re ready to determine if you need a business broker to help sell your business.
Who Is a Business Broker?
A business broker is a financial professional who helps companies buy and sell privately-held businesses.
To complete the process, they often need extensive experience in negotiation and familiarity with the best practices for selling different types of companies.
Depending on their arrangement with you, they may be paid by commission or retainer fee. Typically they target between five percent and ten percent of your total transaction amount.
Furthermore, business brokers are also known as:
- Business intermediaries
- Mergers and acquisitions (M&A) professionals
- Transaction broker, acquisition specialist, or business transition professional
- Business sales professional
Now that you have a basic idea of what a business broker is let’s continue expanding on the important aspects of their profession.
What Are the Benefits?
Business brokers can help increase revenues and provide advice. Most importantly, they are neutral third parties that make sure everything runs smoothly through negotiations. This means no more backroom deals without your knowledge!
A good business broker will also have contacts in every area related to buying and selling a company. This is so they can guide you if you’re not familiar with the process.
In addition, working with an experienced broker will enable you to communicate effectively when it’s time to negotiate. Some of the things covered are price and payment method. They possess valuable expertise regarding these negotiations.
Finally, some business brokers offer additional services. For instance, advising on financial matters and preparing business valuations.
What Is Involved in the Process?
Business brokers typically take a percentage of commission if you choose to sell your business. Some will choose to work on retainer if you need their services only to buy one.
They will then put together several documents related to the sale and handle all negotiations. This is so it occurs fairly for both parties involved and oversees any legal paperwork necessary.
During this time, they may also help advise you about how much your company is worth. They will also cover when would be an optimal time to make such a deal happen during market fluctuations.
How Do I Choose the Right Business Broker?
It’s important to find a broker that specializes in the type of industry you’re involved with. It doesn’t hurt to ask about their general experience as well.
For example, if they’ve sold many businesses similar to yours before, this will likely result in better success rates for your transaction. They know what buyers are looking for when buying companies within your sector.
Asking questions like who their most recent clients were can help determine how successful they were in the past. This is to make sure to inquire about these details during your initial consultation or interview process.
It would help if you also looked at where the majority of their current clientele comes from. This will give you an idea of which geographical location is the most appropriate for you.
Finally, it’s important to find a broker who has experience selling companies like yours within your region. They will have access to more potential buyers this way.
The Five Most Important Questions to Ask Potential Business Brokers
If you are getting ready to buy a business with a business broker, you should ask a few questions first.
Ensure that the business broker answers each one truthfully and does not try to push any agenda or service on you.
This way, if they don’t have what you’re looking for, there won’t be any hard feelings about wasting anyone’s time! If it doesn’t feel right in interviews, then most likely, things won’t play out well once a deal has been, so make sure to trust your instincts.
1: What Is the Level of My Involvement?
The first question to ask your potential business broker is how involved you will be during the process.
The biggest benefit of working with a business broker is that they can manage all aspects of the sale. They can do this without direct input from you or your company’s employees.
However, this doesn’t mean that these transactions still prove beneficial for everyone involved. But only as long as each party knows what their role in the deal is beforehand. They must also commit entirely to fulfilling it to meet mutual goals.
Obviously, if there are no limits placed on your involvement, then don’t expect anything significant. You can expect at least an increase in start-up costs once everything has been finalized.
2: What Is Your Success Rate With Similar Companies?
The next question to ask your potential business brokerage is their success rate with similar businesses to yours in the past.
The selling process can be a long, difficult and expensive process. Hence, you must go into it knowing all of your options beforehand. This should include how much money will need to be put upfront before any results are even seen on paper!
If they don’t provide an answer or continue to avoid questions related specifically to numbers, then this might not be the best deal for you. These figures give a clear idea of possible return rates from different brokers without having actual deals fall through. This may affect future clientele down the road.
For example, if there have been many failed transactions in recent years where workable deals were almost made but fell apart at the last minute because of certain details, then you’ll want to know this information right away before entering a contract with them.
On the other hand, if they have been very successful in selling companies similar to yours and usually see results within weeks or even months depending on what your specific company is being sold for, then you should feel confident that everything will be okay when the time comes. Their previous clients are proof enough that these negotiations can work out successfully. Proof that it can happen without any major problems occurring later.
3: How Will Your Involvement Affect Employees?
After establishing their ability to succeed with your business, you need to ask your potential business broker how their involvement will affect your employees and the company as a whole.
Since each situation is different, you can’t expect that every single worker at your company will be able to move on with ease during this time of transition. Hence, it’s important to keep communication open between yourself and everyone else. This includes everyone who has been affected by such changes, like customers or even vendors, if need be!
They should either have an answer ready for you beforehand if they know what certain details might lead to. Still, there also shouldn’t be any problem exchanging numbers afterward so that future negotiations go more smoothly once everything has been finalized. No one wants those involved with the sale process (including brokers!) to waste valuable time waiting around when parties could talk things out quickly and efficiently instead.
4: What Is Your Commission?
After that, you need to establish your potential business broker’s commission fee. This is so that you can make an educated decision before finalizing anything.
Since commissions are usually based on a percentage of the sale, it makes sense to know how much is going directly into their pockets. You need to know if the deal goes through and what kind of return they expect for such high stakes!
When brokering deals, these fees add up quickly when someone has made enough sales. This means that brokers need to have certain criteria in place beforehand. This is regarding whether or not one should add more money onto the table (at their expense!) depending on certain details like company popularity among other factors.
Therefore, there shouldn’t be any discomfort with bringing up such numbers. Everything about this process needs to be communicated clearly from start to finish. This must occur before signing on the dotted line, or no one is going to be satisfied afterward.
This means that it’s in everyone’s best interest to establish such details beforehand and not once a deal has already hit rock bottom.
5: Can You Provide References?
Before you even begin the initial steps towards brokering a deal, you must ask potential business brokers for references. This is so that you can get an idea of what kind of people they have worked with within the past.
This is such a big decision to make and every company has very different goals when being sold. Thus, having access to information from former clients about their experiences working through certain details.
For example, negotiating sales prices or seeing how quickly one finalized deals afterward will provide much-needed insight before committing yourself further down the road. This means that if your broker doesn’t want to give out any names, then something might be up here!
Lastly, asking them whether or not previous clients are willing to answer questions themselves should also help. This will assist you in getting a feel for the kind of people they have worked with before. This is such an important factor to consider when thinking about whether or not it’s worth their time in the first place!
Additional Questions to Ask
After establishing everything, you need to ask your potential business broker how your company will be different. How will it change once everything has been finalized?
Some companies might end up being too big for them. Getting an idea of where you stand financially at that point should help clarify what kinds of things are going on behind closed doors.
For instance, who else could potentially become involved if any changes need to be made along the way.
You can also ask how long the entire process will take from start to finish.
Ask what kinds of things could come up along the way that might need additional attention from one party or another.
Many companies are looking for quick deals in a short amount of time. Knowing this information beforehand can help you determine whether or not they’re capable of handling your case.
Finally, you can ask if there are any renovations or updates your business needs before being put up for sale. This is to determine whether or not your company’s value will be going up in the long run. This is something that business brokers don’t always tell you upfront so one might as well include it!
By asking all of these important questions beforehand, you can make sure you’re on track for a successful sale. This can be done even before signing any contracts and getting started.
It shouldn’t take much time at all. There are plenty of details to consider before deciding who exactly should handle things moving forward!
Business Broker Selection Successful
To ensure that everything goes smoothly, business owners should ensure they’re asking the right questions beforehand.
By doing this, it’s easier to determine whether or not a potential business broker can handle your type of company. This ensures you have an idea about how long things will take and what kinds of additional tasks might be involved in the meantime!
If you’re interested in selling your business with a professional business broker, get in touch with me and I will happily accommodate your needs.