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If you have decided to sell your business and you’re looking for the best way to maximize value, you have two options: you can go the Do-It-Yourself route or enlist the help of a professional business broker. While you can successfully sell your business on your own without the help of a broker, most business owners don’t possess the knowledge, experience or skills necessary to make a good deal, which can leave you feeling like you left money on the table after the sale.
The best option for most business owners is to hire a broker, so it’s very important to find the right broker. The type of broker you hire can make or break your sale. Whether it’s to strike the best deal or sell at your asking price so that you can have sufficient capital to fund your next endeavor, a good broker can help you get there.
Questions To Ask Your Potential Business Broker
Below are ten questions you should ask before working with a business broker:
1. What’s Your Valuation Process?
To find out how experienced a broker is, you need to ask how he or she conducts a business valuation. If they provide vague answers or rely on generic approaches, you should simply walk away.
Professional business brokers take into account many factors to determine an appropriate asking price for a company. The same formula that works for online consulting firms, for example, may not be applicable in retail, given structural and organizational differences.
2. How Will You Protect The Confidentiality Of The Process?
It is critical to protect the confidentiality of the sale. Ask the broker if they have policies in place that keep the sale of a business confidential.
If information about the sale leaks out, it could prompt a mass exit of key employees from your company, hurting your bottom line and the sales price. Furthermore, your competitors might exploit the opportunity to gain a competitive advantage.
3. Do You Have Qualified Buyers For Businesses Like Mine?
If a broker claims to have a large pool of prospective buyers, that’s great, but that may not necessarily help you.
Having thousands of buyers that aren’t qualified or interested in buying a business like yours might be a waste of time. You need to work with a broker who specializes in selling businesses like yours or has qualified buyers from your industry.
4. What’s Your Pricing Strategy?
Putting an accurate price tag on a business is the key to attracting the right prospects for your business. A good business broker knows how to develop a realistic pricing plan to attract prospective buyers and create deal tension so you maximize your sales price. So asking this question will help you gauge a broker’s ability to land a deal faster.
5. How Many Years Of Experience Do You Have As A Broker?
In the brokerage world, there are different types of brokers, all with different experiences, strengths and weaknesses. So you have to do your due diligence to ensure the broker you’re hiring is the right fit for your business.
Some of the best brokers out there are business owners or former business owners turned brokers. While some new brokers can fit the bill, you really should factor in a broker’s experience and ability to land a good deal when hiring.
6. What Do You Charge?
Generally, most business brokers prefer to take a commission, i.e. a small percentage of the sales price, but some will charge a retainer fee for services or work that goes beyond the scope of the project. Some brokers may lower their commissions in exchange for fewer services, but when brokers charge higher commissions, it usually motivates them to pursue higher a sales price.
7. Have You Ever Sold A Business Like Mine?
Working with an experienced broker who has sold lots of businesses like yours is critical. Selling an internet-based business is a lot different from selling a manufacturing plant. You need to take into account a broker’s experience prior to hiring so you don’t waste valuable time and resources on someone who doesn’t have the connections, market access, and the know-how to negotiate a good business deal.
8. What’s Your Listing Term?
A listing term of one year is the industry standard. But inquire about the contract length and the conditions in which the contract can be terminated.
9. What Steps Do You Take To Prepare A Company For Sale?
Ask the broker the steps they will take to prepare your company for sale. How do they conduct due diligence? Will they be with you every step of the way, i.e. to prepare marketing materials, negotiate and finalize the sales contract with the buyer? Or will they simplify show up at the last minute to close the deal, delivering little in the way of service, guiding you end-to-end through the sale of your business?
10. Who Will Prepare The Sales Contract? You Or An Attorney?
Professional business brokers work hand-in-hand with an attorney to ensure that agreements are properly structured before you sign.
Asking your broker the right questions before bringing him or her on board is critical to success. The ten questions discussed above will help you get to know your broker better. However, if selling a business is not your thing, you will be better off working with an established brokerage firm like Raincatcher.
By working with Raincatcher, you won’t have to worry about the technicalities of the sales process because you’ll be assigned professionals who will take care of everything from valuation, marketing, documentation and contract negotiation. Contact Raincatcher today for a free valuation and other inquiries.