Dealing with business brokers can be a breeze, but it all comes down to the broker you choose. Thankfully, there are more quality brokers than there are bad ones. But that doesn’t mean you should just choose the first broker you come across.
When it comes to choosing a business broker, you want to find a company that shares and values your company’s vision and strives to help you find the right buyer for it. The same goes if you’re looking to invest. You want a return on your investment, right? Well, wouldn’t you want a broker who will set you up with a diamond in the rough, then?
For that reason, we’d suggest asking potential brokers a few questions just to check if they’d be the right fit or not.
1. How many years of experience do you have in the industry?
When you engage with a business broker for the first time, ask them if they’d be happy to answer a few questions first. This will just break the ice a little. The first question you want to ask is about their experience. Ask them how many years they’ve been practising. Getting a basic understanding of their experience will show you how well-suited they are to process your business transaction.
2. How close can you get business to the original asking price?
A good broker will ensure that you and the buyer get and pay a fair price for the business. This means that they won’t let you overvalue or undervalue the business but will help you set an appropriate price. In addition to this, they’ll also ensure that you don’t have to lose much money but rather get as close to your asking price as possible. By asking these questions, you’ll get an understanding of how often the broker folds and drops the asking price.
3. What’s your transaction turnaround?
Sometimes the sale of a business can go on for months, making it frustrating for everyone involved. A good broker should have a track record of closing sales faster than the average transaction. This is around 4 to 6 months.
5. How do you find buyers?
Most business brokers will have a pool of investors that they dip into to find potential buyers for your company. Ask them about their methods in sourcing buyers and how they’ll find someone who meets the standards for your business. You don’t want a broker that’s going to put barely any effort into finding the right buyer.
6. Once you have a buyer, how do you vet them?
There’s a difference between serious buyers and those who are just looking but can’t really do anything. You only want serious buyers looking at your business—individuals who are able to get a loan or have the finances to back up their purchase.
Likewise, you also want a person capable of running your business. Ask your broker how they’ll ensure this all. Most good brokers do proof of fund checks, and they look at work experience, education, reputation, and anything that’ll ensure them a loan.
7. What’s your approach to financing?
This is more for the buyer but also benefits the seller. Ask the broker what their approach to financing is. Some brokers might not help with financing at all, while others take a more invested approach. They’ll help with preparing the buyer’s business plan, submitting loan applications, and finding the buyer the best place to get a loan.
8. How do you earn commission?
Certain brokers might charge you a fee for their services upfront, while others take a commission on the sale once it goes through. Whatever they opt for, keep in mind that this figure should never be above 10% of the business sale price. If it is, we’d suggest looking into why. Also, don’t be weary of businesses that charge a fee upfront. While it might seem expensive, it’s a way for them to test how serious you are about selling your business or not.
9. Have you worked with businesses like mine before?
It’s extremely helpful to have a broker who’s experienced selling a business in the same or a similar industry to yours. In this case, they’ll have the know-how on marketing your business and what red flags to look out for to ensure the sale goes well. Because they’re familiar with the industry, there’s also a good chance that they’ll be able to process it faster, meaning that the transaction time of your sale or purchase might be sooner, too.
Final Thoughts
Some of these questions can be difficult to ask, but they’re important to help you find the right business broker. If you are looking for a place to start, consider contacting Lloyds brokers in Sydney, Australia. They’d be more than willing to help you help!