5 Questions to Ask Before You Hire a Business Broker
A business broker may be your best ally when you sell your business. But before signing the engagement contract, you need to be clear about what you’re getting.
A business broker may be your best ally when you sell your business. But before signing the engagement contract, you need to be clear about what you’re getting. The broker works for you, which means you must interview them just as thoroughly as you would interview any other potential employee. Here are some of the most important queries to pose:
How much experience do you have?
Business brokerage is a specialized niche industry, but there’s not a lot of specific education for brokers. So experience means a lot. You need a broker who can point to a long resume not just of clients, but of successfully sold businesses. More than just experience, however, make sure that your broker has experience in your specific industry, and ideally in your niche.
Is your pricing fair and realistic?
Realistic pricing is a key determinant of selling a business. Quality brokers neither under or over-value a business, and rely on specific data when assessing value. This allows them to stick within a predetermined price range because anything less is a disservice to the client. If your broker waffles on pricing, this suggests they may be interested in earning your business than acting as a trusted advisor. So don’t just wait to hear a price you like. Assess whether the person suggesting the price knows what they’re talking about and is making their assessment based on real knowledge, rather than just the desire to please you.
How do you set a price?
One of the most important roles of a broker is to help determine value. Good brokers have specific strategies for assessing value. This methodology should be tailored to your specific type of business since the value is key to a successful sale. A price that is too high will cause the business to stagnate on the market, eroding perceptions of value. Excessively low pricing leaves money on the table. Good brokers offer a realistic assessment supported by research and comparables.
How do you protect confidentiality?
Confidentiality protects the sale by preventing competitors from gaining access to sensitive information and guarding against information that could cause clients or staff to jump ship. Breaches of confidentiality may undermine the sale, and perhaps even have long-term effects on your daily operations. A good broker knows this and knows how to provide key details to potential buyers while still keeping the sale quiet. Ask what you can expect, and request references so you can verify.
Can you back up your claims?
Brokers are salespeople at heart. That includes the ability to sell themselves. So don’t fall for a friendly smile, flashy website, and big promises. Indeed, some of the best and most effective brokers are those who are willing to tell you that which you don’t want to hear. So trust, but verify.
The best brokers can support their claims with references and data. So take into account each variable, and trust but verify. Ask for references, and follow up. Then weigh your options for a few days before making a decision.