Once a business owner has decided to sell their business with the assistance of a business broker, they owe it to themselves to ask a lot of questions before choosing which broker to represent their interests. Since the most fundamental trait an experienced broker must have is credibility, the following questions need to be asked.
One of the first questions should be, “Will you be able to get the price I want for my business?” If the broker says s/he can get the seller’s asking price or more, be wary. Since owners sometimes overvalue their business, sellers should be cautious if the broker says s/he can meet or beat their expectations.
Perhaps even more important, ask the broker to explain how this price will be attractive to a potential buyer. If a broker is unable to explain this to the seller, how will they be able to explain it to a buyer?
Another question to gauge a broker’s credibility is to ask if s/he charges an upfront fee. Some brokers’ modus operandi is to get owners excited by telling them what they want to hear and then have them write a check before any marketing has begun, let alone a prospect located.
“Inc.” Magazine recently published a story exposing a national business-brokerage company that charged significant upfront marketing fees, yet had an extremely poor success rate in actually finding a buyer. This same company has “represented” numerous business owners throughout Northern Nevada with the same results.
Sellers should make sure their brokers represent a wide selection of businesses and, even more importantly, make sure they are quality and profitable businesses. Nothing diminishes a broker’s credibility with a legitimate buyer faster than when they present a list of unprofitable businesses for sale.
Another question that can help determine a brokers’ credibility is to ask them to explain where their marketing efforts are directed. In today’s marketplace, a credible broker should be able to find buyers not only located in Northern Nevada, but across North America.
A direct and accurate answer to this question can often separate those who are credible and those who are not.
Finally, the best indicator of a broker’s credibility is a satisfied client. This includes both buyers and sellers. An experienced and credible broker should be able to provide a long list of clients representing that have had a successful relationship. This list should be readily available.
Do not accept the “confidentiality” excuse that many marginal brokers use when asked to supply such a list. Granted, there is a period of time right after a business sale is consummated where it often is in the best interest of both the buyer and the seller to remain quiet about the transaction. However, this period usually expires shortly after employees, suppliers, customers and competitors find out about the transaction.
By taking the above steps, business sellers can ensure a company with the same qualities they possess is representing them.
Buzz Harris is a Licensed Business Broker with The Liberty Group of Nevada. Contact him at BHarris@TheLibertyGroupofNevada.com.