An excellent broker maximizes the value of your business, finds serious buyers and guides you through a … (+)
The hiring of the bad broker can cost you thousands, maybe even millions. A bad broker could undervalue your business, waste your time with unskilled buyers, or – a case, to sell your business. But a large broker? They maximize the value of your business, find serious buyers and guide you through a transparent and stress -free outing. So how do you make the difference? By asking the right questions. Here are 10 questions to ask a business broker before hiring them.
10 questions to ask a business broker before hiring them
Not all brokers are created equal. The best are experienced, ethical and aligned on your financial objectives. Before signing contracts with a business broker, ask them these 10 critical questions:
- How many companies like mine have you sold last year?
- Who buys companies like mine recently?
- What was the main reason why companies like mine did not sell?
- How do you determine the price requested for my company?
- What is your success rate to conclude offers?
- Do you only work in committee or do you charge the initial costs?
- Can you provide references from previous customers?
- What marketing strategy will you use to sell my business?
- How to detect potential buyers to make sure they are serious?
- What qualifications or certifications do you have?
1. How many companies like mine have you sold last year?
You don’t want to be someone’s “first attempt” to sell a business like yours.
An experienced broker should be able to appoint several transactions they have concluded in your industry in the past year. If they hesitate or dodge the question, it is a red flag.
What to look for: a broker having a successful success in the sale of companies similar to yours, ideally within your industry.
2. Who bought companies like mine recently?
Brokers with real knowledge of industry can appoint typical buyers: investment capital companies, competitors, international investors or new entrepreneurs.
If they cannot describe the market or landscape of buyers, they are probably not operated in serious buyers.
What to search for: a broker that includes the trends in buyers in your industry and transaction structures.
3. What was the main reason why companies like mine have not sold?
A broker with experience will not see why companies do not sell and they should be able to tell you how to avoid these traps.
Perhaps the price requested was too high, the finances were in disorder or that the company was too dependent on the owner. You should know which red flags are for buyers who acquire companies like yours.
What to search for: a broker who is honest on the challenges and proactive about solutions.
4. How do you determining the price asks for my business?
This is a question of brand or rupture.
A good broker will use several evaluation methods (market comps, analysis of cash flows, multiple Ebitda) and will explain why your business is worth what they say.
If their only answer is “we will list it and see” – Run. It is not a strategy. It’s game.
What to look for: a broker which includes the evaluation of companies in your industry and can justify its pricing strategy.
5. What is your success rate to conclude offers?
Many brokers face all the customers they can, but not all of them close sales.
A good broker should have a success rate of at least 60 to 70% for transactions completed. If they dodge this question of success rate, it is a red flag.
What to search for: a broker who concludes most of the offers they conclude and not only collect customers.
6. Do you only work in committee or do you charge the costs in advance?
Some brokers charge heavy mandates in advance before starting the work. Others are only paid when they successfully sell your business (based on the commission).
The best brokers for your business are confident enough in their ability to sell so that they do not require initial costs.
What to search for: a broker reserved for the Commission – or one with reasonable and transparent costs.
7. Can you provide references from previous customers?
If they are gifted in what they do, they will have happy customers happy ready to guarantee for them.
If they apologize or cannot provide references, it is a major warning sign.
What to look for: at least three references of owners who have managed to sell their business with this broker, ideally companies in your industry, your geography and your income tranche.
8. What marketing strategy will you use to sell my business?
Selling a business is not only to list it. It is a question of attracting serious buyers.
A good broker should have a clear marketing plan, including:
- Target good buyers
- Confidential lists on several platforms
- Take advantage of industry networks and databases
- Sales equipment designed by professionals
If their strategy is simply “we will list it and wait for it”, they are not proactive enough.
What to look for: a detailed and multi -channel marketing approach.
9. How to detect potential buyers to make sure they are serious?
Not all buyers are serious or qualified. Some simply sail, some cannot afford your business, and some just want to spy on your finances.
A strong broker pre-qualifies buyers by:
- Checking financial capacity
- Ensure an industry experience or strategic adjustment
- Require NDA before sharing the details
What to search for: a broker that filters unskilled buyers so as not to waste time.
10. What qualifications or certifications do you have?
Certifications are not everything, but they have professional credibility.
The best brokers are members of the International Business Brokers Association (IBBA) or have a certified commercial intermediary designation (CBI).
What to search for: a broker with industry references and a renowned network.
How these 10 questions saved a business owner from a bad deal
Michael had a successful digital marketing agency but did not know how to sell it. His first broker seemed nice, but after six months, there was no offer.
Frustrated, he pulled the broker and used these 10 questions to filter other brokers.
His second broker:
- Had sold more than 5 similar companies in the past year
- Knew the buyers of its industry
- Only worked on the commission – they were therefore motivated to sell
- Had a solid marketing plan to attract serious buyers
In three months, Michael had several offers and sold his agency for 42% more than the first estimated broker.
Don’t just hire a broker, hire the good
The right broker will maximize your outing. The bad will waste your time.
Before signing anything, use these 10 questions to ask a business broker. They could make a difference between walking away with money that changes life or leaving a lot of money on the table.