7 Questions to Ask Every Vendor Advisor or Business Broker

Once you have made the difficult decision to sell your company, the last thing you want to do is become bogged down in the complications of the actual business sales process itself.

Business brokers help owners (sellers) and future owners (buyers) work through the business transferal process, ideally helping you get the best deal possible for both your budget and your specifications. Put succinctly, a business broker is like a real estate agent for companies, facilitating the sale and receiving a commission for their help.

Why Hire a Business Broker?

Selling a company is much more difficult than most people think. In fact, only 25% of businesses with revenue under £7 million are ever sold. Even deals between buyers and sellers that have already begun but have not yet been completed have only a 50% chance of ever being finalized. Overall, 80% of listed businesses will never be sold and 90% of people looking to buy a business will never complete a transaction.

The reasons for these difficulties are many – ranging from the surprising reality that about 65% of business owners do not know the accurate valuation of their own company to legal complications and misunderstandings.

Business brokers can help both buyers and sellers overcome many of these obstacles. They understand the ins and outs of buying and selling businesses in your region and are often obligated to be licensed in their field. In the US, they will ask a commission of between 8-12% on the final sale price of the business from their client, in the UK it tends to be in the 5-10% range. However their cost is often more than made up for in the better price received for the company.

Even more, a business broker will help you from the beginning, providing you with a fair valuation of your company, an overview of how similar companies have been selling recently, and ways you can get the most out of the transaction. Business brokers also sign confidentiality statements, guaranteeing that your company’s activity will remain hidden until things are finalized. 90% of sellers have reported significantly less stress from this complicated process that usually lasts over a year simply by hiring a professional business broker.

What Should You Keep in Mind When Selling Your Company?

There are several important considerations you must keep in mind when gearing up to sell your company. Confidentiality is extremely important, as several things can happen that will negatively affect your selling price if it becomes popular knowledge that your company is on the market before you want it to be. Receiving an accurate valuation of your company is also of utmost importance.  

It is practically impossible for you to objectively value your own company, so a professional valuation company or business broker is essential to making sure you are asking a realistic price for your business. Understanding business financing is also required for a good sale, along with all legal issues relating to transferal and ownership of property. A business broker can help you with all of these aspects.

What Seven Questions Should You Ask When Evaluating Your Potential Business Broker?

Although a good business broker will be able to help you with almost any of your questions relating to the sale of your company, a few questions can be asked upfront to guarantee you will be working with a qualified professional. Keep these seven questions in mind when choosing your business broker:

• Is the business broker certified/licensed? (The best brokers are CBI – Certified Business Intermediaries)

• What networks/listings are they using to sell their clients’ businesses?

• What is the broker’s recent track record? Have they recently sold companies like yours?

• What do former clients say about the business broker? Have they been sued?

• What valuation methods does the business broker use?

• How does the broker charge commission? (Upon sale completion, partially upfront, etc.)

• Will the business broker agree to carve outs? (Carve outs are exceptions for potential buyers you are already in contact with).

Make sure to ask your potential business brokers the abovementioned questions to find the right fit for you. With the help of the right business broker and a bit of patience, there is no reason you will not find a successful buyer for your company.