It is very important that you thoroughly interview your business broker before signing an agreement with him or her.
10 Recommended Interview questions to business brokers…
- How does the business broker protect confidentiality and can they demonstrate the confidentiality processes? They should have all written materials including the confidentiality documents to leave with you for review.
- How does the business broker qualify buyers and can they demonstrate it? They should have all written materials including the confidentiality documents to leave with you for review.
- What types and how many lending sources does the business broker have that are readily available to finance the buyers? They should have multiple levels of lending sources and should be able to name a couple of them. They should also have the ability to pre-qualify your business for financing.
- Is the business broker fully trained, certified and supported by a reputable source and can they verify it? This would include a contact person to verify it.
- Is the business broker willing to leave you full disclosure materials on their entire process and philosophy? They should have all written materials including the buyer and seller agreements to leave with you for review.
- How diversified is the business broker as far as networking affiliations to find qualified buyers for the businesses for sale. They should be able to list at least a half a dozen affiliations and networking sources.
- How many listing does the business brokers and their agents take. If it is more than 10-12 listings per broker or agent then how could they possibly give your business for sale the time and resources it needs.
- Ask the business broker who they work for – you or the buyer. This should always be YOU unless dual-agency is a requirement.
- Are the business brokers willing to co-broker. if NOT then you are not dealing with a reputable business broker.
- How does the business broker get paid? At closing – never before – unless you agreed to a legal retainer to be represented.
If a business broker requests or does any of the following – it could be a warning sign to WALK AWAY!
- Wants a fee to do a market value analysis – the exception being if you elect to have a Third Party Valuation done – but verify who the Third Party Valuation provider is. Choosing to have a Third Party Valuation done should always be an option NOT a requirement.
- Requires you to pay for a Third Party Valuation to take the listing – this should never be required. This is an unethical approach by business brokers to generate an immediate income stream regardless of whether they take an agreement to sell your business.
- Discourages you from talking to your attorney or accountant – this happens too often and is done by business brokers with something to hide – a good broker should encourage you to talk to your attorney and accountant AND be willing to meet with them upon your request.
- Requires you to agree to hold a note (seller financing) to take the listing – this should be your decision and this type of activity is generally associated with brokers who feel the only way to sell a business is with owner financing – not true – they do not have the financing sources to finance buyers.
If you feel uncomfortable or you feel pressured then walk away. Remember that a business broker should work for you NOT vice versa.
If you are looking for a business broker who will represent your best interests then contact River City Business Alliance at (817) 710-5893 for a confidential NO OBLIGATION meeting.