What Other Wisconsin Business Brokers Don’t Want You To Know

The secrets to success, as with most secrets, don’t stay under wraps long. In fact most business brokers would prefer you not know, and not ask, the questions contained in this article.

As you might expect, many prospective clients (Wisconsin entrepreneurs and business owners seeking to sell their business) who contact me have the same questions.

  • How much can you sell my business for (or what’s my business worth)?
  • Do you have a buyer?
  • How much do you charge?

Not many people, however, ask me the most important question: what differentiates you from other brokers?

To help you select a business broker, I created a list of things I would ask if I was hiring a broker.

What will you do or say if I don’t agree with your valuation of my business?

Will you just go along with the price I want to list it at?  Or will you insist on listing it at your valuation price?  A good broker will be able to defend the price he has set for your business.  If he can’t defend it to you, how is a buyer going to react to the price?  A good broker may agree to list it for a slightly higher price than was originally proposed.  I will tell my sellers that if after 90 days, if we have no bites, then it is time to drop the price to my original valuation.  If they will not agree to that up front, then the business will most likely not sell.

Will you drop your business broker commission rate?

If a broker comes out of the gate and just says yes, they are not a good negotiator.  A good broker should stand their ground on their commission rate.  There are a few examples where a broker may sell your business for a lower commission rate, maybe they have a buyer looking for your type of business, so they know the sales cycle will be short and they don’t have to do as much prep work to get your business ready for sale.  Or with some franchises, there is not as much work to do on the broker side, the franchise already has sales and marketing documents built from selling the new franchises.

Most business owners looking to sell their business never ask me the most important question: what differentiates you from other brokers?

How do you qualify business buyers?

A good broker will interview all the buyers that call.  The broker will  determine their financial capability, business experience, fit for your business, fit with you (you and the buyer will be working thru the buying process and then will most likely work for a few months to a year after the sale).  Many buyers and sellers become friends after the sale has occurred, the seller usually has a vested interest in the buyer succeeding and continuing their legacy they started. Many sellers will call to see how business is going and be a mentor to the new owner.

Do you attend business buyer and seller meetings (the answer should be yes)?

I have a friend that hired a broker locally to list his business for sale.  After 2 years he only had one buyer interested in his business.  The buyer and his partner showed up unannounced at his business (while his employees were there).  He had no idea who they were.  The buyer said that “so & so from brokerage x, said we could come over and see you.”  The broker never let him know.  Your broker should be at all meetings with buyers.

What will you use to market my business?

A good broker should create a CIM (Confidential Information Memorandum) that contains a history of your business, strengths, weaknesses, opportunities, and threats (SWOT Analysis).  The CIM should also have all your financials, challenges you as an owner have faced, how you overcame them, and the lessons learned.  They will also use the various websites available for business brokers, market to other similar businesses thru teaser sheets (a general overview of your business) and cold calling.

Why do you think my business is a good business to sell?

A good broker should be able to give you a few reasons why your business looks like the right kind of listing.  It should be profitable, it should have steady or growing revenue, it should have few add-backs to the cash flow, it should be able to run with out the owner being there all the time, good employees, good documentation and systems in the business.

How many businesses do you have listed for sale right now?

If the answer is more than 10, they most likely won’t be able to give your listing the attention it needs.  There is a ton of work that goes into managing your listing, talking to buyers, bankers, and other brokers about your business.  There is not enough time in the day or week to handle much more than 10 listings at one time.

Do you negotiate with the business buyer or do I have to as the business seller?

A good broker will be the intermediary and will do the negotiations with the buyer for you.  Selling and buying a business is very emotional for both sides.   A good broker will present you with offers from a buyer, which is not just telling you what they are willing to pay.  They will explain how they will finance it, what they may want or not want included with the sale, how long of a non-compete and consulting agreement they want.  They will help break down the offer to purchase so you understand what the buyer is proposing.  So many sellers only look at the final dollar amount, not considering what is in the offer.  On the reverse side, brokers also help you draft counter offers to go back to the buyers and explain to the buyers your side.  When buyers and sellers negotiate with each other, the atmosphere can be very charged.  A buyer may put in an offer 12% below the listed price and the seller is offended by the offer and says “you’ll never buy my business for that, what are you nuts?” Then the buyer says “Your business is barely worth that, you’re lucky I offered you that much!” Now the fight is on and the deal is most likely dead.  By having a skilled negotiator as the middle-man/woman, the emotion is contained and doesn’t hurt feelings.

Will you be present at my business sale closing?

The answer should be yes. Your broker should be working diligently with attorneys, lenders, and anyone else involved with the closing to make sure it stays on track (as time kills deals) and then coming to closing with a list of to do’s that have been completed by everyone and making sure that everything is ready to consummate the sale.