The best way to ensure that the process of selling or buying a business goes smoothly is to choose a business broker that understands your needs and that you can trust. The process to transition a business can be expensive, complicated, and overwhelming; any worthwhile broker should be more than willing to answer your questions. This market was founded on making informed choices, including choosing the right professional for your needs.
1- How long will it take for a business to sell?
It is difficult to predict how long it will take for a business to sell. Buyers typically fall into one of three categories, individuals looking to buy a job for themselves, businesses looking to expand their operating capabilities, and firms or individuals looking to buy a business as an investment. Each of these categories has unique supply trends for how many buyers are actively looking for acquisitions. The supply of individuals is driven by how many people want to make career changes, while the supply expanding businesses is driven by how each small or medium sized business is doing financially. The most predictable category is firms or individuals looking for investments, but their criteria might be extremely specific, and they are willing to wait for the right deal. When you ask this question, consider what qualities are most important to you in a broker. Did they assure you that your company would sell in 6 months or were they upfront about why the process is unpredictable?
2-How do you manage deal fatigue throughout the transaction?
Deal fatigue is when the buyer, seller, or both begins to feel frustrated, irritated, or upset by the pace of the transaction and is a leading cause for deals to fall apart. Once a deal starts to take shape, it is the responsibility of your broker to keep things moving forward at a reasonable pace. However, it is also their responsibility to manage your expectations about how the transaction will work, to minimize deal fatigue. Brokers will each have their own strategies for how to do this. When you ask this question, you are looking for an answer that tells you your broker understands this issue and the impact it can have. One of the worst things a broker could do would be to ignore deal fatigue. By avoiding the problem, a broker would just be increasing the chances that the deal will fail.
3- Who else from your team will be involved, aside from the business broker?
Depending on the size of the firm you are considering, the business broker might be the only person you will be interacting with. But, if you are paying for a valuation, marketing/listing fees, or any other added services, then it is reasonable to assume that the broker might have a team that will be integral to the transaction. If you would feel more comfortable by meeting those other team members, why not ask? This question will also help you and the broker to identify if your transition team will need any additional professionals, like lawyers, accountants, or wealth managers.
4- What is your payment/commission structure?
While there are some industry standards for commission charged on M&A transactions, it is up to the discretion of the firm for how much they charge and the schedule they require payment on. To avoid surprises, ask up-front about payment schedules, commission structures, and success fees. If you have a lawyer you trust, you may even consider asking them to review any contracts you sign. Trustworthy brokers should be willing to answer your questions and will be transparent about how, why, and when they get paid. Ask as many questions as you need to feel confident that you understand what you are committing to.
5- How do you protect my confidentiality?
When selling a business, confidentiality allows you to ensure a smooth transition between your ownership and the new buyer taking over. Business transitions often make employees nervous about job security, suppliers concerned about whether standard orders will continue, and customers worried about whether they will have to start purchasing elsewhere. All of which can disrupt business and can negatively affect the operation that the buyer takes over. By ensuring confidentiality until a deal is secured, the impacted parties’ concerns can be addressed immediately through introduction to the new owner or natural continuity of service. A business broker and their team must ensure that they are taking the necessary precautions to minimize exposure during the listing process to sell your business. For example, many brokers require signed non-disclosure agreements (NDAs) from interested buyers before any identifying information is shared. When you ask this question, you are looking for an answer that aligns with how you want to treat your employees, suppliers, and customers throughout this process but that acknowledges the impact of breaching confidentiality.
6- What if I change my mind about listing and want to take a break?
Every business broker will have a different answer to this question. When you sign a listing agreement, you may be committing to paying to be listed for a specific length of time. Whether or not you can take breaks from listing will be dependent on the agreement you signed and the process that the broker follows. For example, you may pay upfront for the first year of listing before you have the option to take a break. When you ask this question, be careful to consider your personal feelings about selling your business. Do you expect to want to take a break if the sale doesn’t happen quickly? If so, you should look for a broker that can accommodate that need.
Other questions to consider asking:
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- Can you explain how deal structure will affect the payout I receive?
- Will you be listing my business for sale on the online marketplaces? If not, can I?
- What happens if I find the buyer myself through my network?
- Do you guarantee that my business will be sold?
- Can you explain the typical steps involved in the business sale process, from the initial listing to the final transfer of ownership?
- Can you describe your network of potential buyers and how you access them?
- What support do you offer after the sale?
- Can you walk me through what a successful business sale would look like with examples from past sales?
