• Fri, Aug 14, 2020
  • Thinking About Hiring A Business Broker? Ask These Eight Questions First
  • Sell_business_contract
  • Good article published in Forbes Magazine by my friend and fellow business broker Trent Lee of Las Vegas, Nevada.  Trent is one of the top grossing brokers in the United States.  His questions are very similar to the questions I suggest business owners ask their brokers prior to selling their business.  My questions can be found here:  https://www.edisonba.com/pages/selecting-a-broker

    Forbes Magazine

    Trent Lee

    Link to Forbes Article

    Eventually, most business owners experience the thought of selling their businesses. How much it is worth and how long it will take are just a few questions that you’ll need to have answered before making a decision. In order to sell your business for top dollar in the quickest time possible, make sure you have hired a qualified, experienced, and certified professional to help you.

    As a business broker myself, I recommend speaking to at least three business brokers in your area. Ask these eight questions of each to find the best and most qualified business broker.

    1. Are you a member of the International Business Broker Association (IBBA), and do you hold the certified business intermediary (CBI) designation?

    The IBBA is the gold standard when it comes to organizations within the industry. You can check the IBBA website to look up members by state or brokers by name.

    Asking about the CBI designation is vital. It’s one thing to be a member of the IBBA, which offers benefits and training to its members, but it’s quite another to meet the criteria, have the experience, complete the training hours and pass the four-hour test to hold the CBI designation. Be sure to not only look at your broker on the IBBA website, but check that they hold the CBI designation as well.

    2. How many deals, on average, do you close each year?

    This is one of my favorite questions because it quickly helps you determine who the real deal-makers are within your city. Statistics range widely from city to city and state to state, so it’s difficult to nail down the average closed transactions a typical business broker does.

    The best thing to do is to ask this question of three or four local business brokers to get a feel for how your market is. Usually, you’ll find one out of the three or four who closes significantly more transactions each year than anyone else in the surrounding area. That’s a good indication you’ve found your primary business broker.


    3. What certifications or designations do you hold regarding business valuations?

    This question is revealing because many business brokers do not have formal training, certifications or designations to do business valuations or appraisals. They may have taken a weekend training course or some online classes and learned the local market over the years, but if you can find a business broker who holds official certifications as a business appraiser and a CBI, then you’ve really found a great resource.

    Primarily, ask if the broker is trained and certified from any of the most well-known organizations in the area: American Society of Appraisers (ASA) Business Valuation, Institute of Business Appraisers (IBA), International Society of Business Appraisers (ISBA) or National Association of Certified Valuation Analysts (NACVA).

    4. Do you work full time as a business broker, or do you do residential/commercial real estate as well?

    This is an important question because you want to make sure you are putting your future retirement and business exit plans with someone who does business transactions full time. Be wary of someone who primarily does real estate and handles business transactions here and there as they come up. Just because they sell a lot of residential homes doesn’t mean they have the same ability and experience to successfully sell a business.

    5. How long have you been a business broker, and have you ever sold your own business?

    I like this question because it separates those business brokers who have been exactly where you are, selling their own businesses for top dollar, from those who haven’t. It’s not that those who haven’t sold their own businesses aren’t as good; it’s that those who have sold their own businesses before becoming business brokers themselves have so much more to offer because they understand exactly what you are going through. They know how important and life-changing this decision is.

    6. Check out your business brokers' online reviews.

    This can be done with a quick Google search for the business broker's name or a generic search like "your city + business broker." Scrolling through the search results in the local maps will also display each broker's reviews. If the broker you are thinking about using has been doing this for years, even decades, make sure they have a significant number of positive reviews.

    7. How long do you expect it will take to find a buyer and close the transaction?

    According to 2015 BizBuySell research, almost half of business owners surveyed initially anticipated the process to take less than five months, but “brokers found that to be unrealistic, with a majority (54 percent) saying sellers should set their expectations in the six to 11 months range.”

    There are a number of strategies that an experienced business broker can use to help speed that timeline up, but most importantly, they should be able to articulate, at least generally, how long you should expect the transaction to take. According to the Q4 IBBA MarketPulse report in 2018, the average time to close is just over nine months.

    8. How much can you sell my business for, and what is the likely deal structure?

    This is particularly important for you as the business owner. Get an idea of not only the estimated sales range, but also the likely deal structure. Are most transactions within your industry sold with SBA financing, seller financing, earnouts, etc.? A certified business broker will be able to pull deals from multiple databases of previously closed transactions and give you a general idea of both the sale range (high to low) and an ideal deal structure.

    Feel free to ask me any of the above questions and more.  I am here to help you sell or purchase a business. 

    Eric J. Gall
    [email protected]