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Basic Questions to Ask a Business Broker

Posted by on July 1, 2009

Here are a few questions to ask a business broker; you should interview several before selecting one:

1) How long have you been in this business?
2) What is your personal background and business experience?
3) How many transactions have you personally closed?
4) What is the range of values of the transactions you have closed?
5) Please show me three offering memorandums you have personally prepared.
6) Have you experience selling businesses in my industry?
7) What is the last company you sold in my industry?
8) How did you place a valuation on it?
9) How do you prospect for potential buyers?
10) Do you have an existing database of buyers?
11) How many potential buyers are in your database?
12) How do you pre-qualify potential buyers?
13) How will you prevent my competitors from finding out?
14) Do you have a national or international network of associates you can work with?
15) What is your fee structure?
16) What is your fee structure based on?
17) How long would our engagement contract be?
18) Can I work with other brokers?
19) If I give you the buyer, does that reduce the fee?
20) Who do you consider your competition?

Of the above, pay most attention to how they will market, and the quality of their presentations. A good intermediary will prepare two documents on your behalf, a 2-3 page “teaser” which talks about your business and your industry but does not specifically identify your company; and a comprehensive offering memorandum, which includes industry and business information on your company, historical financials, pro-forma projections, a basis for the valuation, an inventory of what is being sold, and an asking price and terms.

There should be a clear demonstration of understanding in this document, and that thought went into it. Too often intermediaries are content to post a few lines on a website, or send along some scanned or copies of faxed documents, without explanation or detail. At this point, you lose a number of potential buyers.

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