As a business broker myself, I recommend speaking to at least three business brokers in your area. Ask these nine questions of each to find the best and most qualified business broker.
- Are you a member of the International Business Broker Association (IBBA), and do you hold the certified business intermediary (CBI) designation?
The IBBA is the gold standard when it comes to organizations within the industry. You can check the IBBA website to look up members by state or brokers by name.
Asking about the CBI designation is vital. It’s one thing to be a member of the IBBA, which offers benefits and training to its members. Still, it’s quite another to meet the criteria, have the experience, complete the training hours, and pass the three-hour test to hold the CBI designation. Be sure not only to look at your broker on the IBBA website but also to check that they possess the CBI designation.
- How many practices, on average, do you close each year?
This question quickly helps you determine who the real deal-makers are within your city. Statistics range widely from city to city and state to state, so it’s difficult to nail down the average closed transactions a typical business broker does.
The best thing to do is ask this question of three or four local business brokers to get a feel for your market. Usually, you’ll find one out of the three or four who closes significantly more transactions each year than anyone else in the surrounding area. That’s a good indication you’ve found your primary business broker.
- Are you a general business broker, or do you specialize in a specific industry?
Most business brokers are generalists and do not specialize in a specific industry. What prior experience in healthcare does this broker have?
Have they ever owned or managed a medical practice? This knowledge is invaluable when evaluating, marketing, and selling a medical practice.
You wouldn’t want a general practitioner performing your coronary bypass. The same holds true for business brokerage.
Find a business broker who holds official certifications such as a CBI and prior experience owning or managing a medical practice; then, you’ve truly found a great resource.
- Do you work full time as a business broker, or do you do residential/commercial real estate as well?
This is an important question because you want to make sure you are putting your future retirement and business exit plans with someone who does business transactions full time. Be wary of someone who primarily does real estate and handles business transactions here and there as they come up. Just because they sell a lot of residential homes doesn’t mean they have the same ability and experience to sell a business successfully.
- How long have you been a business broker, and have you ever sold your own business?
I like this question because it separates those business brokers who have been exactly where you are, selling their businesses for top dollar, from those who haven’t. It’s not that those who haven’t sold their companies aren’t as good; those who have sold their own businesses before becoming business brokers themselves have so much more to offer because they understand precisely what you are going through. They know how important and life-changing this decision is.
- Check out your business brokers’ online reviews.
A quick Google search for the business broker’s name or a generic search like “your city + business broker.” Scrolling through the search results in the local maps will also display each broker’s reviews. If the broker you are thinking about using has been doing this for years, even decades, make sure they have a significant number of positive reviews.
- How long do you expect it will take to find a buyer and close the transaction?
According to the 2015 BizBuySell research, almost half of business owners surveyed initially anticipated the process to take less than five months, but “brokers found that to be unrealistic, with a majority (54 percent) saying sellers should set their expectations in the six to 11 months range.”
There are several strategies that an experienced business broker can use to help speed that timeline up. Most importantly, they should be able to articulate, at least generally, how long you should expect the transaction to take. According to the Q4 IBBA MarketPulse report in 2019, the average time to close is over 8.6 months. Due to the complexity of medical practices, they take significantly longer to close.
- How much can you sell my business for, and what is the likely deal structure?
This question is particularly crucial for you as the business owner. Get an idea of not only the estimated sales range but also the likely deal structure. Are most transactions within your industry sold with SBA financing, seller financing, earnouts, etc.? A certified business broker will be able to pull deals from multiple databases of previously closed transactions and give you a general idea of both the sale range (high to low) and an ideal deal structure.
- Do you have an Arizona real estate license?
Many out-of-state business brokers advertise in Arizona to try to get listings. There are two problems with this option. First, to get the best service possible, you need to hire a local business broker who knows the local market and can be available for face to face meetings with potential buyers. Secondly, to legally sell a business in Arizona, a business broker must have an Arizona real estate license. A lot of out-of-state business brokers are not licensed in Arizona and are therefore breaking the law. How ethical do you think these business brokers will be when dealing with you if they won’t even follow the law?