It’s not unusual for someone to become a business broker after selling their business. Business owners who want to sell their business are attracted to them. They know the industry and the business owner may know, and trust, them. Those are good attributes; but they are not enough to make someone the best choice to sell a business. Here are some other questions you should ask.
The first question to ask is if this person is a salesman, more specifically a business to business salesman. That is probably the primary skill of a business broker. It’s not just about having an outgoing personality. They need to be persistent and follow-up buyer interest. They need to be organized and keep good records. Many business owners are not the best salesmen.
Another important question to ask is how the business broker is going to market your business. If you are considering an industry veteran, how well did they market their business? How good are they at Internet marketing because that is the primary way that businesses are marketed.
How knowledgeable is the industry veteran about financial statements? I’ve found few business owners that are as knowledgeable as I, and our other brokers are, about understanding financial statements and how to present them to potential buyers. As a business broker, you are frequently helping buyers to understand the financial statements. If a business broker cannot explain them, the buyer won’t buy the business.
Do they understand business valuation? If not, how are they going to defend the purchase price?
How knowledgeable are they about the process of selling businesses and the legal documents involved? Typically, lawyers are concerned about the legal issues in the documents. There are many other ways that an owner can lose money. Buyers can make all kinds of unreasonable demands. You need someone that knows the ins and outs of business sales to guide you.
Unless you want to give the buyer a loan to buy the business, the buyer is going to need financing. A good business broker knows lenders who will expedite the loan process and what the terms of financing should be.
Does the business broker have an office where you can meet with buyers? Or, are you going to have business meetings at a coffee shop? The business broker is your agent. You want them to project a professional image.
Having industry experience is a benefit in selling a business. The business broker should understand the business better and know potential buyers. But, by itself, that is not enough to choose a business broker. There are many other skills a business broker needs to sell a business.