Additional information on each question from 50 Questions to Ask a Business Broker When Selling a Business
Q11. Do you have any case studies or success stories I can review?
Why should you ask this?
In case studies or success stories, examine the evidence they provide on their website for tangible items such as photos, difficult-to-fabricate financial records, and publicly verifiable details.
For example, if you’re looking for records in California, you can search the California Secretary of State’s website for business entity filings, which provides details on corporations, limited liability companies (LLCs), and partnerships.
Q12. Do you have a team supporting you, or are you handling everything on your own?
Why should you ask this?
Your broker should have a support team to help with the selling process. Without one, they’re managing everything on their own. A team ensures that each aspect of the sale gets the attention it needs.
No single broker can be an expert in all the areas required to sell your business. Marketing, valuation, negotiation, tax planning, and working with buyers each demand focused time and specialized expertise.
While it’s not uncommon to find solo brokers in the industry, it’s important to evaluate how many listings they manage each year and how they handle each stage of the process. If they’re overseeing every detail of multiple deals at once, realistically, they may not have the time or bandwidth to give your business the attention it deserves.
Q13. How will you determine the value of my business?
Why should you ask this?
Brokers use various valuation methods, such as earnings multiples, revenue multiples, or asset-based valuations. Understanding the broker’s approach helps ensure it aligns with both what you expect and the current market conditions.
Valuation is one of the most crucial aspects of selling your business. An incorrect valuation can result in leaving money behind if it’s undervalued, OR failing to attract buyers if it’s overvalued.
Brokers typically use several approaches to determine your business’s value, including income-based methods (such as EBITDA multiples or DCF-discounted cash flow analysis), market comparables (comparing sales of similar businesses), or asset-based valuations. Ask the broker to explain their preferred method and why it suits your business and explain the terminology in layperson’s terms.
Q14. What factors do you consider when valuing my business?
Why should you ask this?
A range of factors influences valuation, so it’s important to understand which ones the broker considers most significant for determining your business’s value. This question helps you find out if the broker is considering important factors such as growth, competition, your customers, and any unique assets that could affect the price.
Key factors to consider include financial performance (such as revenue, profit margins, and cash flow), customer base (diversity, contracts, and loyalty), industry trends, intellectual property, brand strength, the competitive environment, and growth potential. Each of these elements will affect the valuation, and brokers may prioritize them differently. For example, a business with strong recurring revenue and long-term customer contracts might justify a higher multiple estimate than one with declining sales, even if both are similarly profitable. Keep in mind what you think a business might be worth isn’t necessarily what it IS worth. Even though you put $200K into renovations to a property doesn’t mean you can raise your estimated price by that much and get it back.
Q15. Can you walk me through how you determine the valuation?
Why should you ask this?
Understanding the step-by-step process the broker uses to evaluate your business gives you a clearer picture of how accurate and thorough their valuation will be. Having the broker explain their valuation process will help you gain a better understanding of how they arrived at the final price and help you feel confident that it’s realistic.
Ask the broker to explain how they collected data and how they compared your business to others in the market. A good broker should be able to outline their process clearly, which may include analyzing your financials, conducting market research, and assessing operational factors. This also helps you understand whether they’ll rely solely on historical data or if they’ll consider future projections and strategic opportunities. Make sure the broker explains their reasoning in simple terms so that you can fully grasp the basis of their valuation.
