I’m a licensed business broker, having helped both individuals and companies buy and sell businesses ranging from your typical “Main Street” business to multi-million dollar acquisitions. I have also run my own small business, and both bought and sold that business through a business broker.

My experience has been that most small business owners really don’t know much about how to sell their business, and a shocking number of them may get taken advantage of by buyers and business brokers. The Business Broker Secrets series of information is my attempt to give back some of the knowledge I have acquired, leveling the playing field so that business owners go in with full knowledge of what to expect. Lots of brokers don’t like the fact that I am sharing all this information… many of the suggestions I give will make the broker work harder for the same amount of money. Ultimately, it is your business, and I believe your right, to obtain the maximum amount of after-tax cash in your pocket after a sale. In that spirit, I hope you will find this information valuable.

Here are five top questions to answer for yourself BEFORE you contact your first broker.

Before you contact a broker, make sure what you know what you want to get out of the activity. While you may be calling to just get a feel of the market, many brokers will attempt to sell you on listing your business. Usually they will do this with an inflated expectation of how much money you could get, mentioning a hot buyer looking to buy your type of business, or just to “test the waters”. Don’t fall for it! Selling your business is a serious matter, consuming your time and risking exposing your desire to sell to suppliers, customers, and your employees. There are better ways of gaining an understanding of what your business is worth and what other businesses in your area are selling for… for no cost, and without leaving your home.

If you have truly considered the decision, have some understanding of the right and wrong times to sell, and have done your homework, then contacting a business broker, on your terms, is a smart move.

Even if you have done all the necessary prep work and truly understand that it is the right time to sell, you are a much better informed customer to at least have a ballpark idea of your business worth before talking to brokers. This will provide you valuable insight to the skill and truthfulness of the different brokers you talk to before selecting which, if any, you choose to work with. Don’t give the broker all the power…. come to the first meeting well armed with an understanding of your business worth.

Are you aware of how certain business structures can result in about half the after-tax cash in your pocket compared to more favorable structures?

Do you know how to get around these issues?

Do you understand why your broker may not be very helpful in guiding you through this issue?

Do you know the things you need to tell them UPFRONT to make sure your interests are protected?

Tax planning is a complicated business. However, when it comes to selling your business, it is critical to understand some key issues and strategies to deal with them. Mistakes here can cost you hundreds of thousands of after-tax cash… yet through some quirks in the way business brokers work, they may not necessarily be on your side. (Here’s a hint… business brokers don’t get paid on your after-tax cash, just the sales price). Before you go to see a business broker, you must have at least a rudimentary understanding of the issues to do the right things from the beginning.

One of the biggest fears many business owners have when selling their business is insuring confidentiality. I’m sure you’ve had the nightmares… employees finding out and leaving for more stable jobs, suppliers taking advantage of the situation to raise prices, customers choosing to go elsewhere out of fear, competitors using the information to their benefit. If the fact you are selling your business gets out, it can cost you dearly.

Business brokers can certainly help you maintain confidentiality, but some much more so than others. Before going to a broker, you really need to understand what types of protection exist, where the broker fits in to the picture, and the expectations I recommend you set UPFRONT to make sure that your secret is kept without jeopardizing the likelihood of selling for the maximum amount. There are definitely techniques and strategies that can be used… but some might make your business broker’s job a bit more difficult, and they might not use them unless you know to ask. This is why it is essential you know IN ADVANCE how you’d like to protect your confidentiality.