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Wednesday, March 01, 2017

Can Your Business Broker Answer These 7 Questions To Your Satisfaction?

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The only thing worse than no professional support is the wrong professional support. Ask these questions to secure the right broker.

Selling a business on your own to save money is often a false economy, but hiring the wrong business broker is arguably even worse.

If you are to avoid appointing a broker who is unscrupulous or just plain incompetent, then your vetting and selection process must be as rigorous a possible.

Here are seven important questions you should always ask before engaging a broker to represent your interests throughout the sale.

1. Do you have relevant experience, expertise and licenses?

If your prospective advisor cannot furnish a relevant license, then you should look elsewhere – although not all states require licenses.

Some require licenses if the broker is commissioned but not if they charge an hourly fee. Brokers in California and several other states, meanwhile, require either a broker license or law license to legally advise a business owner on business sales.

Where a brokerage employs several sales operatives it is also sensible to enquire about the experience of the person directly responsible for selling your business – just to ensure you are gaining full benefit of the expertise vaunted in the broker’s sales pitch.

You should also check that the broker has a track record of handling business sales in your sector and/or of a comparable size.

2. What’s your verdict on the chances of selling my business?

Beware of brokers who are overly accommodating, promising that selling your business at the price you want will be easy – especially if you know that your business is flawed.

Because of cognitive bias and an understandable desire to maximize the return on their entrepreneurial efforts, many business owners overvalue their business – and it’s the broker’s job to tell them so. Therefore, a broker who disagrees with your price, and presents compelling evidence to back up their view, deserves your respect.

By all means, you may well have a fantastic business that is highly saleable, but just be suspicious if the broker makes too many guarantees about a smooth process and an easy sale.

3. How will you value my business?

Business valuation is often a complex process, and different industries will often prefer to use methods particular to them. Getting a valuation wrong can deter buyers from enquiring if it’s skewed too high and leave you short-changed from the sale if it’s skewed too low.

So if you have any doubts at all on this score, you need to look elsewhere.

4. How will you find buyers? Where will you advertise?

You should expect your broker to do far more than simply list your business on the internet and hope it sells. For instance, will they prepare a prospectus? (And can they show you an example?)

Are they going to devise a marketing plan and share it with you? Do they maintain a buyer database? And do they have any affiliate business brokers who can also promote your business?

5. How do you screen prospective buyers?

A business sale demands discretion, especially as regards vetting and qualifying interested buyers as they emerge.

Only those with the means and intention – as far as that can be guessed – to proceed and are prepared to sign an appropriate NDA (non-disclosure agreement) should ever be allowed access to sensitive business information. The last thing you want is customers and rivals hearing about your sale plans.

6. Can I see some testimonials?

The broker may include testimonials on its website or marketing materials, but it’s worth digging deeper by asking if you can contact those satisfied customers directly for references.

It’s also worth asking for a sales ratio – the percentage of businesses that find buyers – and how many of these are in your sector.

7. How strong is your network of attorneys, accountants and tax specialists?

One major benefit of having a business broker to help you sell your business is that they can recommend what additional expertise is required and when, and they can put you in touch with reputable, reasonably priced practitioners.

So make sure you ask your would-be representative how broad and deep their professional network is in regard to attorneys, accountants and lenders.

By Melanie Luff, Online Journalist for BusinessesForSale.com, the market-leading directory of business opportunities from Dynamis. Melanie writes for all titles in the Dynamis Stable including PropertySales.com and FranchiseSales.com.

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