What Questions Should You Ask a Potential Business Broker?

When you’re thinking about buying or selling a business, choosing the right business broker is a big deal.

A good broker can help you navigate the tricky process, get the best deal, and make sure everything goes smoothly.

But not all brokers are the same, so it’s important to find one who really knows their stuff and fits your needs.

In this post, I’ll show you the key questions to ask a potential business broker to ensure you find the right partner for your journey.

1. What Is Your Experience in My Industry?

One of the first questions to ask a potential business broker is about their experience in your specific industry.

Selling a business isn’t a one-size-fits-all process—it varies depending on the sector. Whether you’re in tech, retail, manufacturing, or any other industry, the broker’s knowledge in your field is critical.

Industry-specific experience means they understand key market trends, legal regulations, and valuation techniques tailored to your type of business.

For instance, a broker familiar with the tech industry will know how to value intellectual property and intangible assets, while a broker in retail might focus more on inventory and customer base.

When interviewing brokers, ask them how many businesses they’ve sold in your industry and what challenges they faced.

Ideally, you want a broker who has handled several transactions similar to yours. Hedgestone Business Advisors suggest choosing brokers who specialize across multiple sectors to ensure your deal is managed by someone who understands your industry’s unique nuances.

2. How Do You Determine the Value of a Business?

A major question to ask a broker is how they plan to value your business.

Accurate business valuation is crucial because overpricing can scare away buyers, while underpricing could cost you thousands.

A good broker uses data-driven methods such as:

Earnings Multiples: This approach looks at your business’s net profit and applies a multiplier based on industry standards.
Discounted Cash Flow (DCF): Discounted Cash Flow projects future cash flows and discounts them back to present value.
Asset-Based Approach: This method calculates the value of the business based on the total assets minus liabilities.

Make sure the broker explains the valuation method clearly, so you understand how they arrived at the number.

According to BizBuySell, the average sale price of a small business in 2023 was around $315,000, but this varies widely depending on industry and market trends . Having a knowledgeable broker ensures a fair price.

3. What Is Your Marketing Strategy for Selling My Business?

Marketing your business is key to attracting serious buyers, and the strategy your broker uses can make or break the sale.

Ask the broker how they plan to market your business and what platforms they’ll use. Some important strategies include:

Targeted Advertising: The broker should advertise in industry-specific publications or websites where your ideal buyers are likely to look.
Listing on Major Marketplaces: Websites like BizQuest, BusinessBroker.net, and BizBuySell are popular platforms for listing businesses.
Leverage Their Network: Experienced brokers often have a list of potential buyers they can reach out to directly.

Also, ask how they will maintain confidentiality. You don’t want employees, clients, or competitors finding out your business is for sale before it’s necessary.

A good broker will use blind ads and require interested buyers to sign a non-disclosure agreement (NDA).

4. How Do You Screen Potential Buyers?

Not every inquiry is worth your time. A business broker needs to filter out buyers who aren’t financially qualified or serious about purchasing.

Ask the broker how they vet potential buyers. A solid screening process includes:

Financial Verification: The broker should require proof of funds or financial statements.
Buyer Motivation: They should assess if the buyer’s goals align with the business. For example, if a buyer is looking for a hands-off investment, your business might not be a fit if it requires active management.
Experience: A broker might check if the buyer has the necessary experience to run your business successfully.

This process saves time and helps avoid deals that fall through later in the negotiation process.

5. What Are Your Fees and Commission Structure?

It’s crucial to know upfront what a business broker charges, as fees can affect your final profit.

Most brokers charge a commission that ranges from 8% to 12% of the final sale price. Some might also ask for a retainer fee or charge additional costs for marketing.

Always ask for a breakdown of the fees and what’s included.

For example, if a broker charges 10% on a $500,000 sale, you’ll pay $50,000. But watch out for hidden fees. Some brokers may charge extra for listing your business on premium platforms or for extensive marketing efforts.

Make sure you understand their full fee structure to avoid surprises later.

6. How Will You Keep Me Informed Throughout the Process?

Communication is essential during a business sale. Ask the broker how they’ll keep you updated.

Will they send weekly reports? Are they available for phone calls or in-person meetings?

A good broker should provide regular updates on inquiries, negotiations, and other important developments.

Clear, open communication helps avoid confusion and ensures you’re always in the loop. It’s also important to ask what tools they use to track progress.

Some brokers use CRM (Customer Relationship Management) systems that offer transparency into each stage of the process.

7. Can You Provide References or Testimonials?

Always ask for references or testimonials from past clients. This gives you a sense of the broker’s professionalism and success rate.

Reach out to these references to ask about their experience—how smoothly the transaction went, how well the broker communicated, and if they achieved the sale price they were hoping for.

A trustworthy broker will be eager to provide references and testimonials.

This is your chance to verify their claims and ensure they have a proven track record in closing deals like yours.

Frequently Asked Questions

How long does it take to sell a business?

The timeline for selling a business can vary greatly depending on factors like industry, market conditions, and the business’s financial health. On average, it can take 6 to 12 months to find the right buyer and close the deal.

Can I sell my business without a broker?

Yes, you can sell your business without a broker, but it’s often more challenging. A broker brings expertise in valuation, marketing, and negotiations, which can help you get a better deal and navigate the complexities of the process.

What documents do I need to sell my business?

You’ll need several key documents, including financial statements, tax returns, legal agreements, and an asset list. Your broker can guide you through gathering and organizing these documents for potential buyers.

What is an exclusive listing agreement with a broker?

An exclusive listing agreement means that you can only work with one broker to sell your business for a set period. This allows the broker to fully focus on your sale and invest in marketing efforts.

How do business brokers find buyers?

Brokers use various methods to find buyers, including online business-for-sale listings, industry connections, targeted ads, and their network of potential buyers. They often have access to a large pool of serious, pre-qualified buyers.