20 Questions to Ask a Business Broker Before Partnering with One - Part 3

Selling a business is no small feat, but it is a venture that is made much easier with the involvement of a business broker. Finding the best broker for the job can also be an ordeal unto itself, but a seller who knows the best questions to ask is in a fortunate position.


1.   Do you specialize in particular industries?  It is not necessary for the broker to have industry experience related to the business being sold, but it is beneficial in maximizing values and guaranteeing a smooth process.


2.   How do you evaluate my business’s worth?  A professional, experienced business broker can easily gauge if the seller’s hopes and needs are in line with reasonable expectations. The same broker will have the confidence to speak frankly with the seller so those hopes and needs are adjusted appropriately. A seller should not “shop around” for a broker who tells what the seller wants to hear. Valuation of a business is based on multiple factors, including a financial audit, employee retention statistics, and research into comparable businesses in the same industry and general location.


3.   Can you show me the comparables for my business?  A well-prepared broker will pull statistics on businesses that are comparable to the one he or she will be selling. Comparing apples to apples in this way will yield the most realistic valuation of the business. Realistic expectations are imperative for pricing the business properly to ensure it does not remain on the market longer than necessary. A successful business broker will evaluate what the business is truly worth, rather than telling the business owner what he or she would like to hear.


4.   Will I have to hold paper or look into seller financing?  Do you assist with creative financing? Banks historically represent less than 1% of the total lending sources in the small business sale market. A truthful broker will make this information known and will offer alternative solutions for creative financing. Statistically, an owner who does not offer owner financing on a listing decreases the likelihood of selling by 40%. 


5.   How do you qualify buyers?  Brokers will often have a prospective buyer sign a non-disclosure agreement, at which time the buyer is then provided with extremely sensitive information about the business, even though the buyer has not been qualified. Preferably, a seller will hire a broker who qualifies buyers by having them submit particular information, including a financial statement.


If you would like assistance with selling your business or determining whether partnering with a business broker is appropriate for you, please contact George & Company, located in Worcester, MA. We have honed our business skills over decades of appraising, selling, and financing small to middle-market companies. It would be our pleasure to assist you in making decisions that will best benefit you and your company.