You have worked hard, and you want to put the really hard work behind you. Retirement is dangling before you and so you’re on the hunt for a broker to help you sell your business. You don’t want any of your hard work to go to waste and you want to get the most from your business.
This means finding the right people to help you meet your goals. And most likely, you already have more questions than answers about selling your business:
- What do buyers look for?
- What is my business worth?
- Is this the best time to sell?
- Will a buyer pay me what my business is worth?
- How much should I expect to pay in taxes?
- Will I have to work for the buyer?
All of these are important questions, and the answers to some may influence your decision on how to handle your business. Some of these questions may reveal that selling your business may not be the most profitable way for you to retire. But if you have weight your options and decided to sell, your next step is to find yourself a broker.
How do you know you’ve found a good broker? What questions should you ask when selling your business through a broker? Let’s first understand whom brokers typically work with.
Business Brokers’ Sweet Spot
If your business generates less than $12M in revenue, the transaction intermediary best suited to help you find a buyer for your business is a business broker. Investment bankers in the DC metro area tend not to work with companies with revenues under that threshold. There are, of course, exceptions, so take these dollar amounts as rough guidelines.
Business brokers work with owners of lifestyle businesses (those that have simply, but consistently, provided lifetime income to their owners) and of businesses in the “lower-middle market” (companies with revenues exceeding $1M and cash flow exceeding $450,000). Again, please note that these dollar amounts are broad generalizations.
Look Before You Leap
What questions will help you to identify the best broker for your business? We’ve listed our favorites below. Of course, before you start interviewing brokers, ask the advisors you trust (your accountant, attorney, commercial banker, financial and exit planner) for recommendations.
There are a lot of brokers out there and it isn’t easy to distinguish the great from the good from the not-so-good. While your advisors will not have worked with every broker active in your area, they most likely have experience (both good and bad) with some of them. If your advisors can’t provide you recommendations, give us a call. We can.
With those recommendations in hand, check out each broker’s website. Some brokers provide the basics about how they operate, but few include much (if any) information about the fees they charge. Many provide lists of deals they’ve completed. Some even include purchase prices. The larger brokerage companies maintain searchable databases of business for sale. The caveat here is that not all listings may be active.
Almost all brokers in Baltimore offer free consultations, so we’ve created this list of questions to help you take full advantage of that consultation.
13 Questions To Ask A Broker BEFORE Selling Your Business: Finding the Best Fit
How long have you been a broker?
Brokers come with broad range of experience: some have spent their lives as brokers, some are former business owners who now work with owners and some may be looking to you for their first deal.
Tell me about experiences you have had selling companies like mine.
You want to hear about transactions involving businesses not necessarily of similar size or industry as yours but in complexity. If you own a manufacturing company and the broker specializes in small retail firms, he or she may not have experience in dealing with inventory and other issues that are an integral part of your business. You might ask what their top value limit is on the transactions they manage. If they tell you that the sky is the limit, keep looking.
How many transactions have you completed in the past year?
This is a logical question, but it doesn’t really get to the importance of experience selling businesses like yours. Again, look for experience—either as an owner or broker of businesses as complex as yours. Ask about their degrees or experience in accounting and finance.
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