11 Questions You Should Ask a Business Broker Before Hiring Them
Selling a business? Unless you have extensive time and resources to do it on your own, you are probably considering a business broker. These brokers can make your life easier by doing research, finding potential buyers, and getting the best offer.
However, if you want all the benefits of working with a broker, you need to spend time looking for the right one.
Top-notch brokers are rare jewels. Even if they come highly recommended, it’s up to you to conduct a smart interview in order to identify their weak spots. We’ve come up with a list of questions to ask potential business brokers in order to choose the perfect candidate.
1. Have you worked with a similar business before?
Even an ideal business broker, who has decades of experience selling bakeries and flower shops, is unlikely to help you with selling a dentist’s office or an e-commerce website.
That’s why it’s the most important question to ask. How much experience does a business broker have with businesses like yours? What type of deals did they finalize?
Top-notch brokers usually have sufficient experience with different types of businesses. Make sure yours is among them.
2. Do you have an office and where is it located?
It may sound like a strange question, but it’s an important one. Some brokers work out of home in order to save money on office rent. While there isn’t anything wrong with remote work, it’s not something you want from a broker.
Working from home often means that the broker is either just starting the business or has many other projects to deal with. And they may not have anything to do with selling companies.
Ideally, your dream broker should have an office in your area. If your broker is working from a remote location, he or she may not be familiar with the local business-selling nuances.
3. Which websites are you planning to list my business on?
One of the most important parts of your broker’s work is listing your business on the appropriate websites. A broker should have a good idea of where to find potential customers and how to make your business visible to them.
If the broker hesitates to answer your question, it may mean that they aren’t familiar with the market.
Some of the most popular websites to list your business on are:
Brokers should be able to explain why their choice of website for your listing can help you acquire a good offer fast.
4. How old is your firm?
It’s important to find out how long brokers have been in business. Even if the firm is fairly young, you can ask about the experience of particular brokers. This information should be backed by a portfolio.
While the services of a startup may be cheaper, the process of selling a business may take much longer than with experienced brokers.
5. How much do you charge?
Brokers usually charge about 10% of the final deal amount. A top-notch broker will never ask for any money up front. They only get paid when the deal is completed.
If they charge more than 10%, ask why the fee is higher than average. Sometimes it’s justified by some guarantees given in the contract.
6. How many businesses have you sold?
The answer to this question should give you an idea of how well and fast a broker is working. Remember, results for a company and an individual broker can vary. So you should be asking about the particular broker, who is assigned to you. If several brokers are working on your project, ask about them all.
Ask how many businesses a broker sells a year. This should help you understand how popular and demanded the company is.
7. Do you co-broker?
Co-brokering is an excellent way to widen the pool of buyers. Your ideal broker should be co-brokering with other individual brokers or companies. If for some reason, the broker doesn’t do it, there should be a reasonable explanation.
According to Orlando based business broker, co-brokering is a vital part of selling a business. If the company you choose doesn’t co-broker, they suggest looking elsewhere.
8. How big is your database of buyers?
By hiring a business broker, you should be getting access to a buyer’s database. Top-notch brokers should have a large database. Sometimes, brokers don’t have one at all. If a broker doesn’t have a database, it will take much longer to find a customer.
The bigger the database is, the more chances you have of selling the business quicker.
9. Are you certified?
Is the broker certified? A broker with CBI certification is bound to achieve excellent results. In order to become CBI certified, brokers should be in good standing with the International Business Broker Association, have sufficient experience, take necessary courses and pass a CBI exam.
10. What is your closing percentage?
How many deals do brokers close? Some brokers don’t finalize all deals, and that’s ok. But what percentage do they close? Anyone with a percentage lower than 90% isn’t worth considering. Ideally, the rate should exceed 85%.
11. How fast can you sell my business?
This is a tricky question because even the best broker can’t guarantee to sell a business within a certain amount of time. If brokers tell you that they can sell your business in two weeks or three months, it should raise a red flag. The average time of sale varies between 6 and 9 months.
The right answer to this question should be the firm’s statistics. They should tell you the average time it takes them to sell a business and show proof.
Even the best business broker may not be suitable for your needs. Be careful about interviewing potential business brokers and asking the right questions.
It may take you several weeks to find the right one. However, the effort you invest in searching for a broker is directly proportional to the quality of the deal.