Selling a business can be a difficult process and not one that you want to get wrong. For that reason, many business owners choose to enlist an expert business broker to ensure they achieve the maximum price.
Still, in an industry with no regulation, choosing the right broker can make or break your sale. For that reason, it’s important to learn as much about prospective brokers as possible before you commit to them.
How you quiz them will vary depending on your sales goals, business size and industry, but the following questions are a great place to start.
1. Do I Need a Business Broker?
Not every business is large enough to require a broker when selling. If you’re looking at less than £50,000 annual profit, it may not make financial sense, with broker fees potentially draining your post-sale profits.
That does not mean using a broker is not the right decision for you. However, it does mean that any broker you speak to should take the time to seriously consider whether you need their services.
If they don’t, it may be a sign that they’re not considering your sales goals fully and you’re likely to be disappointed with their service.
2. How Can I Maximise Profits Before Sale?
A successful sale begins long before you start negotiating with buyers. A basic formula for calculating the value of your business is to times its yearly profit by an industry multiplier.
Therefore it’s always worth asking a potential broker for any advice or steps you can take to maximise your profits before the valuation. These shouldn’t be drastic changes to how you run your business, but even the smallest improvement in profits can have a significant impact.
3. What Do I Need to Do to Prepare for the Sale?
Before you begin the sales process in earnest, you’ll need to collate some resources to prove the value of your business. Documentation of your cash flow and recent tax returns are useful for this, but you don’t want to give everything away at the start.
Asking a broker what documentation you need to prepare as early as possible helps you expedite the sales process and gives you an insight into the experience and expertise of prospective brokers.
4. Can You Advise on Options Other than Sale?
Just as you should ask whether you need a broker, you should also question whether selling your business is the most effective option to achieve your goals.
For example, management buyouts or majority recapitalisations may be a more cost and time-effective way of allowing you to step away from your business. An experienced broker should be able to provide you with options other than sale and advise on whether they’d be suitable for you.
5. Do You Have Experience Selling Businesses Like Mine?
No two industries are the same, so there can be no single strategy for business sale success. Think of it this way, you wouldn’t expect the sale of a high street restaurant to be the same as that of an online estate agent.
If a broker doesn’t have experience of your industry then they are more likely to under or over value your business, struggle to attract buyers and fail to predict stumbling blocks and delays.
Also, consider whether the broker has experience in selling a business of your size. The sale an SME differs greatly from that of a national chain.
6. How Will You Value My Business?
Clearly, the success of a sale depends on an accurate valuation. We’ve already mentioned a basic way of doing so by timesing your yearly profits by an accepted industry multiplier, but any experienced broker should have a far more accurate process.
It’s also worth confirming who will actually value your property, as some brokers will use external valuers. Of course, whether this is a good thing depends on the valuer’s reputation. Still, this gives you another metric by which to determine the quality of a broker.
7. How Will You Market My Business?
A broker’s job is to find qualified buyers for your business, so the process by which they do this is pretty important. When searching for a broker you’ll come across a variety of prices, and the way they market your business is a good way of determining whether they are cost-effective or just cheap.
A cheap broker will likely just add your business to a sales portal and do little to qualify buyers. This comes down to the simple fact that selling a business well takes a lot of time, and minimum cost means minimum time investment from the broker.
More established brokers will likely already have a database of potential buyers, which can make the whole process far easier.
8. How Long Will Selling My Business Take?
Asking many brokers this question should help you set your expectations for exactly how long the sales process takes. It’ll also help you weed out any brokers who are selling an unrealistic timescale.
Make sure you don’t stop at just the overall sales time. Your broker should be able to break down each step in the sales process and make a prediction for how long each will take.
9. How Will You Keep the Sale Confidential?
Selling a business is a delicate subject and one that shouldn’t be shouted about unnecessarily. Therefore, it is key to confirm how the broker will keep the sale confidential.
If news of the sale gets out, you could find staff and customers leaving, which could damage your business’s value and make it far harder to sell.
10. How Will You Screen Potential Buyers?
Selling a business can comfortably take up to a year (and potentially far longer in complex sales) and in that time, you have to keep captaining the ship.
As any business owner knows, your time is very precious, so it’s vital it’s not wasted on unqualified buyers. Therefore, ask your broker what steps they take to qualify potential buyers before you have to deal with them.
11. Can You Provide a Breakdown of Your Fees?
So, we come to the question no one forgets to ask: how much is it going to cost? At this point, though, you need to make sure you’re not swayed by whichever broker has the lowest quote.
You need to get a break down of each quote and understand exactly what you’re paying for. This includes identifying how much you’ll be charged up front and after the sale completes.
You should also ascertain whether you’ll have any costs outside of the broker, such as legal or accountancy support.
12. Who Will Actually Be Responsible for Selling My Business?
This is a question that is often forgotten about but is so underrated. As with any business deal, the person you meet first is not always the person who will manage the implementation of your sale.
This is not necessarily a bad thing, but you should always know what you’re paying for. The last thing you want is to pay a premium price thinking you’ll be dealing with an experienced broker, only to find you’re managed by a junior.
With these 12 questions, you’ll be able to take a big step towards finding a high-quality broker to sell your business. Of course, you should always speak to a variety of brokers before making your decision.
If you’re considering selling your business, then, get in touch with the Glaisyers corporate team and ask us these questions.