Are you interested in buying or selling a business? Do you feel that you lack an understanding of the transaction process? If so, then you need to hire a business broker to help you facilitate the sale.
Doing so can give you a plethora of benefits. You’ll have more peace of mind during the sale or purchase of your business, and it will ensure a perfect fit for either side. All of this, of course, rides on finding the right broker for your situation.
See below for an in-depth guide on the different questions that you can ask before hiring a business broker so that you can ensure a great fit.
1. How Many Businesses Have You Sold?
Like any business that you hire the services of, it’s good to get a better understanding of the broker’s background. For that reason, you should ask them how many businesses that they have sold in the past.
While they might not have the exact count at the top of their mind, they can give you a ballpark figure. This will help you gauge whether or not they’ve experienced it in their field.
More importantly, if they haven’t sold a lot of businesses, then it’s either a sign of inexperience (everyone has to start somewhere) or that they aren’t very dependable.
If you need further confirmation of their service level, you can research the reviews they’ve received online. Be sure to read the comments left behind by the previous buyers and sellers that the broker has assisted. Answer these questions based on their comments:
- Are our clients generally satisfied with this broker’s level of service?
- Does it seem as if they have a good amount of experience?
- Were the previous clients buying or selling a business?
- What do the clients have to say about the broker’s communication skills?
- Is there a repeatedly negative aspect of the broker’s skills that the clients mention?
- What kind of industries are the previous clients in? Is that similar to the industry you’re interested in selling your buying?
2. What Costs Does the Sale of the Business Include?
As with any other business transaction that involves a third-party, there will be costs and commissions that the broker receives from the sale.
The broker must communicate those figures early on. If you’re selling your business, it will help you understand how much of a return you can expect after commissions, costs, and fees are taken out.
There are a few different questions that you should ask in regards to the sale of your business.
First, what is the broker’s commission percentage for the sale? Most brokers will set a percentage after they get a better feel for the market of your business (if you’re selling your business). If the company will be more difficult to sell, then expect to pay a higher commission to the broker for their efforts.
Second, be sure to ask what other costs and fees come with the sale. Are there specific expenses that they will charge you for? What costs are going to be placed on the final sale? These costs shouldn’t deter you. Rather, they should help you get a better feel for the final sale.
Last, ask if the real estate is included with the percentage of their commission. You don’t want any unwelcome surprises with the final costs. Make sure you’re working with an honest business broker who prioritizes communication.
3. Have You Sold Businesses Like Mine Before?
This is an important question for two reasons: First, it helps you find a broker with experience selling in your industry. Second, it helps you find a broker that’s familiar with selling the size and scale of your company.
Different industries come with different obstacles during the sale process. The sale of a chain of restaurants is going to differ from the sale of a law firm.
If they have sold companies in your industry, ask them to provide an example or two. Allow them to shine some light on how that sales process went.
4. Would My Agreement With You Be Exclusive?
Some business owners have the idea of using several brokers because they think it will quicken the sale of their company.
That philosophy is wrong for two reasons:
- Most business brokers work on exclusive agreements, meaning that you aren’t able to work with any other brokers to sell your business except them.
- Even if you did use multiple brokers, they’d each be reaching out to the same interested buyers.
Finding an exclusive agreement with a business broker is best for all parties involved. It helps expedite the negotiations of the sale.
5. What Is Your Closing Ratio?
Closing ratios are a very important statistic for business brokers. It’s a great way to separate the experts from the frauds.
Unsuccessful brokers can make you promises and radical claims until they’re blue in the face, but their closing ratio will always tell the truth. Be sure to ask what theirs is.
There isn’t a specific ratio that you should be looking for necessarily. Rather, ask them what their closing ratio is, then allow them to provide details on it. This will give you more confidence in their skill set.
Find the Right Business Broker for Your Sale Today
Now that you have seen all of these important questions to ask the business broker that you reach out to, be sure to use them to your advantage.
Be sure to read this article for more information on the 7 essential questions that you should be asking when you buy a business.
For more inquiries, please be sure to reach out via our contact us page and we will be happy to assist you further.