Have you decided you're ready to eliminate your company (or possibly take on a new one)? It's an important decision and an excellent one when you're thinking strategically. The first step you'll probably take is to employ the services of a business broker who can help guide you through this process.

There are many brokers, but not all of them have equal information. Before signing any contract, it is essential to ask the right questions, the type that could help you save time, money as well as major hassles.

This article explains exactly what questions to ask a broker prior to concluding any agreement. If you're new to the business or you've been on many times, these inquiries can help you identify the red flags and pick an agent who will have your best interests at the forefront.

Let’s dive into it.

The Most Important Questions to Ask

Here is the list of questions you must ask before signing the contract:

1⃣ What Experience Do You Have in My Industry?

The industry-specific knowledge is crucial. Brokers who are knowledgeable about the market you operate in are able to determine the right price, market and bargain effectively. Check out the track record of the broker with respect to your specific firm, and also recent deals that have been concluded in your particular field.

The follow-up question is:

▻ What other businesses similar to my own have you sold during the last three years?

▻ Do you have any case studies or other references?

2⃣ Are You Licensed and Accredited?

In certain states, brokers are required to have an official license in real estate. Furthermore, membership in professional associations such as M&A Source, the International Business Brokers Association (IBBA) or M&A Source could indicate trustworthiness as well as adherence to moral standards. Also, always verify license status and verify any sanctions.

3⃣ What Is Your Valuation Process?

Being aware of how a broker is going to value your company will ensure that you get an accurate market evaluation. Some brokers use standard methods, whereas others depend more on comparable market prices.

Important considerations:

▻ What financial details do you require from me?

▻ What are the best ways to handle the intangible assets (like brands or customer lists)?

▻ Do I receive a copy of the appraisal report?

4⃣ How Will You Market My Business?

An efficient marketing strategy is essential to attract prospective buyers who are qualified. Find out from the broker about their plans to market your company while keeping it private.

Questions to address:

▻ Do you plan to make use of online listings for direct outreach or even networks of buyers?

▻ What can you do to protect confidential data during the process of advertising?

▻ Do you plan to design your own marketing plan or a teaser?

5⃣ How Do You Qualify Buyers?

An experienced broker does more than take leads, they screen potential buyers to determine if they're financially stable and in the market.

Explore deeper with questions:

▻ How do you know prospective buyers?

▻ Am I engaged in the process of approving prospective buyers before discussions?

6⃣ What Are Your Fees and Terms?

Brokers generally work with commissions, usually ranging from 8% and 12% of the purchase price. Nevertheless, it's essential to know precisely what amount you'll have to pay and the exact date.

Clarify:

▻ Does the upfront cost include a retainer?

▻ What are the services included in the commission?

▻ Do you have a minimum charge regardless of the sale price?

7⃣ What Is the Duration and Scope of the Contract?

Contracts could lock you into a period of time. Be aware of exactly what you're signing.

Ask:

▻ What is the length of time that the agreement will run?

▻ Do I have the right to terminate my contract early? With what terms?

▻ Can I remain exclusively with you? Or am I able to work with brokers from other companies?

8⃣ How Involved Will You Be Throughout the Process?

Some brokers are very hands-on; Others delegate their duties to associates in junior positions.

Confirm:

▻ Who is my primary point of contact?

▻ What frequency will we talk to each other?

▻ Do you plan to be a part of the discussions and your due diligence?

9⃣ Can You Provide Client References or Testimonials?

References will give you invaluable insights into what it's like when working with the broker.

You should contact both successful as well as unsuccessful clients to gather complete information.

🔟 What Happens if the Business Doesn't Sell?

Nobody wants to think about this, however, it's best to prepare.

Discuss:

▻ The exit clauses, as well as the fees when the sale hasn't been completed.

▻ Which happens with the leads and questions after the contract has ended?

Final Thoughts

The right commercial broker could change the course of your purchase or sale. However, as with any major decision, you should do the research. When you've asked these important questions, you'll have the chance to work with a broker who is transparent as well as experienced and determined to achieve your goals. Don't forget, you're more than just engaging a service, you're entering into an agreement. Make your selection carefully.