What questions should I ask the broker?
August 06, 2024
by a searcher from Golden Gate University in Chicago, IL, USA
Hi all! I'm new to the Searchfunder community, and I've found a professional services firm that I am interested in (as owner-operator). Can anyone share a resource or two on questions to ask the broker? Apologies if this is a green question -- I am very new to this process and trying to capitalize on a boomer retirement in a field I have the skills for.
(Note: This isn't geared towards legal/accounting due diligence as I have resources for that. This is more about my interactions with the broker.)
from University of North Texas in San Antonio, TX, USA
Here are some questions to consider:
1. Reason for Sale: Why is the owner selling the business? 2. Owner Involvement: How involved is the owner in the day-to-day operations? Will they be available for a transition period? 3. Business Performance: Can you provide details on the business's financial performance over the past few years? 4. Client Relationships: What is the nature of the relationships with key clients, and how dependent is the business on the owner for maintaining these relationships? 5. Team and Culture: What is the structure and stability of the current team? How would you describe the company culture? 6. Growth Opportunities: Are there any untapped opportunities for growth or expansion that the current owner hasn't pursued?
While dealing with the broker, it's crucial to push for a direct conversation with the seller to see if you connect with the owner and the business. Understand that you have legal and accounting resources for due diligence, but don't let the broker's presentation of Seller's Discretionary Earnings (SDE) distract you—SDE can be manipulated to look appealing. Avoid getting bogged down by discussions about proof of funds at the initial stage; it's premature. First, determine if you like the owner, the business, and how much they care for their people.
These steps should help you gain a better understanding of both the business and the owner's role in its success. Feel free to reach out if you need further assistance. Best of luck with your search!
from University of Virginia in Holmes, NY 12531, USA
1. What's your fee structure?
2. What's your experience in helping to sell this particular type of business? (perfectly fine to ask broadly, e.g., deals closed TTM, average deal size, average time to close, close rate after LOI, etc.)
3. What's your experience in working effectively with potential buyers similar to me?
4. What role, if any, do you play in valuation (and please elaborate)?
5. What's your role in preparing a business for sale?
6. How will you protect process confidentiality?
7. What's your approach to maintaining clear, efficient lines of communication between the parties?
8. (this would be more relevant if you were the seller) - are you tied to an attorney who typically does your deal docs?
9. What's your process for vetting potential buyers?
10. Do you get involved - and if s0, how, and to what extent - in the buyer's financing?
Hope this is reasonably helpful as a start! Glad to discuss. Best, Matt