Your business is your most trusted asset. Choosing the right partner to sell it is critical, and not a process to be taken lightly. We recommend 7 questions you need to be asking any broker, before you sign on the dotted line.
Being in the market for a new business can be overwhelming. In fact, in almost every article online both buyer and seller agree on hiring a broker, because it is a lot to figure out on your own. Having the support of the right broker means the process of buying or selling a business becomes less daunting, and will not interfere with the running of your business.
The best brokers are experienced, eager to help, and are connected to a wide network of businesses for sale and potential buyers. So, it comes as no surprise why this is the most popular decision. However, before you hire a broker, we think there are 7 important questions you need to be asking before signing with a broker for your next business transaction:
1. What is your experience with selling and/or purchasing a business?
This question is likely your most important because you can gauge the answer according to what you are looking for. For instance, you may intend for your question to cover either general experience, or specific sector experience. Many believe it is most important for your broker to have had industry experience. However, what you really need is a broker who is trained to a high-standard, and works at selling businesses full-time. Not as a hobby.
2. What percentage of your income comes from commissions versus fees?
This is important for one simple reason: incentive drives behaviour. You want to be able to determine what type of broker you will be dealing with. Asking this question allows you to discover if your broker wants a quick sell, or are they prepared to hold out to find the best potential buyer who will agree to the best price. You can then make your choice, accordingly.
3. How do you value a business?
In a perfect world, your business would sell for millions of pounds. However, finding out the actual value of your business is an art, not a science. In today’s world, you can access huge amounts of information, to give you a vague idea of the potential value locked in your business. Ideally you want a broker with access to ‘sold’ databases, who can show you what businesses like yours actually sold for.
4. How will you protect my confidentiality?
When selling your business, it is likely you won’t want your employees, or the competition, to catch wind of the sale until you are ready. Employees can become nervous because of an uncertain future, and a competitor may try to use this information to size the upper-hand. Confidentiality is key and should be as important to your broker as it is to you. The best brokers secure a non-disclosure agreement (NDA) from every prospective buyer. You should also review how you will handle confidentiality, if it is ever breached.
5. How many listings do you have right now?
Having a broker who seems to carry few listings may seem great. However, you do not want one who works either part-time, or who is alone in the world. You want a broker who is part of a dynamic marketplace, who has lots of listings – or is part of a network where they can access lots of listings. This helps to create buyer traffic from all over the world, which will hopefully create healthy competition for your deal.
6. How many qualified potential buyers do you have?
Ideally, a professional broker will be a member of an organisation, and can access a wide-network of potential buyers and sellers. This network is equipped with vetted buyers, to make the selling process feel seamless for you. If they are not a member, you want your broker to be able to access a buyer database, which can source brokers from all over the world, putting your business in the minds of many prospective buyers.
7. Do they have access and connections to a skilled team of professionals?
Your broker should be the liaison between your business, the potential buyer, and other professionals you will need, in order to close the deal. They understand the complicated process, once an offer has been made and accepted. A wise and professional broker will advise you to hire the right professionals, once it is time for a contract to be drafted and/or signed. If they argue they can handle all aspects of the negotiation, they may not be as experienced as they proclaim.
At Transworld Business Advisors, we understand the importance of business purchasing and selling. This is precisely why our brokers are more than equipped to answer these questions, and more, providing you with answers you will be comfortable with.
If you are in the market for a new business, or are preparing to sell yours, contact your local Transworld Office today!