Before you sign with a business broker: the questions that show who can actually close

The questions that matter most

Before you sign a listing agreement, ask four things: what kind of companies the broker actually closes, where the buyers will come from, how confidentiality is protected at every step, and what you owe if the business does not sell. Then ask who will do the work and read the agreement's exclusivity and term clauses with your attorney. A good broker answers all of this plainly in the first meeting and tells you something about your business you did not want to hear.

I founded MDR & Associates and have been selling Texas companies since 2008. Owners interview us alongside other firms all the time, and I think they should. A listing agreement gives one firm the exclusive right to market your company for a set period, so the choice deserves the same care you would give hiring a senior executive. Below are the questions I would ask if I were on your side of the table, grouped by what they reveal.

Questions about fit and track record

Start with whether this firm sells businesses like yours. A broker who mostly sells small storefronts works with different buyers, different financing and different documents than an advisor who sells a manufacturer or distributor with eight-figure revenue. Neither is better in general; one is simply wrong for you. Ask for the revenue range and industries of recent closings, not of listings.

Ask how many engagements the firm runs at once and how it decides which ones to accept. A boutique firm that takes a limited number of engagements a year, and declines the ones it does not believe it can complete, has a reason to be selective with you. We handle roughly 20 to 30 engagements a year for that reason. Ask for references from past sellers, and actually call two of them.

• What revenue range and industries have you closed in the last few years?
• How many engagements are you working right now?
• Do you turn down businesses, and why?
• Can I speak with two owners whose companies you sold?

Questions about buyers and marketing

Price comes from competition, so ask exactly how the broker will create it. Who are the likely buyers for your company: private equity groups, capital groups, competitors, individual investors? Does the firm already know some of them, or will it start from a public ad and hope? We offer a company to our own database of qualified buyers first, and only if that does not produce an acceptable offer do we run blind ads on the major business-for-sale sites. More than half of our listings go under contract before they are ever posted publicly.

Ask what the marketing package will contain and who will see it. A serious package includes a business profile, a financial summary, an organizational chart and industry context, and ours adds a video highlighting the company's value drivers. Ask how the broker will help a qualified buyer finance the purchase, because financing is one of the most common reasons deals fall apart; we help qualified buyers with conventional and SBA financing.

• Who are the three or four most likely buyer types for my company?
• Will you contact known buyers before advertising publicly?
• What goes into the marketing package?
• How do you help buyers secure financing?

Questions about confidentiality

A leak can unsettle employees, give competitors talking points and make customers nervous. Ask the broker to walk you through the exact sequence: what a buyer sees before signing anything, what they must sign and complete to see more, and when they learn the company's name. In our process buyers register, sign a confidentiality agreement and complete a financial profile before they receive the detailed package, and any public advertising is blind.

Ask how buyer meetings and site visits are arranged without alerting staff. We schedule buyer-seller meetings at the owner's convenience, usually only once a buyer is considering a letter of intent, and price and terms are not discussed in those meetings. Ask what happens to your documents if a buyer walks away.

Questions about who does the work

In many firms the person who wins the engagement is not the person who runs it. That is fine as long as you know who you will deal with and who negotiates when it counts. Ask who your day-to-day contact will be, who will be in the room when letters of intent arrive, and who sees the deal through due diligence and closing.

In our firm a VP of Client Engagement is the main contact during marketing, and a partner joins for negotiation and stays through closing. Every offer is presented to the owner in person, and the owner may accept, reject or counter. Ask, too, how the broker works with your CPA and attorney. An advisor should coordinate with them, not try to replace them, and should have M&A attorneys they have worked with for years if you need one.

• Who is my main contact week to week?
• Who negotiates with buyers?
• Will every offer be presented to me, and how?
• How do you work with my CPA and attorney?

Questions about the agreement itself

Read the listing agreement or engagement letter before you are emotionally committed. Ask how long the exclusive period runs and what happens when it ends. Ask whether a fee is owed if you sell, after the agreement expires, to a buyer the broker introduced, and for how long that provision lasts. Ask whether any money is owed upfront or for separate services, and what you owe if the business does not sell. Our fee is 100 percent performance-based, so the answer to that last question with us is nothing.

Ask what price the company will be offered at and how that number was reached. If you need help understanding how fees are structured, I go through the models in what it costs to sell a company through an M&A advisor. None of this replaces legal advice. Have your own attorney review the agreement before you sign.

Questions about price and timing

Ask how the broker arrived at a value range and what would move it up or down. A credible answer refers to your normalized earnings, your growth over the last few years, how much the business depends on you and how concentrated your customers are. Ask how long similar sales have taken; our average is three to six months from listing to closing, with outliers on both sides, and an honest broker will explain what could make yours faster or slower.

If you already have an interested buyer, ask how the broker would handle that buyer alongside a wider search. The answer shows whether they understand leverage. I cover that situation in what to do when someone offers to buy your business.

• What would raise or lower your estimate of value?
• How long have comparable sales taken from listing to closing?
• How would you treat a buyer who has already approached me?

Answers that should make you walk away

Some answers tell you more than a reference ever will. Be cautious if a broker agrees with your price before seeing your financials, because that usually means they are competing for the listing rather than planning the sale. Be cautious if they cannot name likely buyer types for your company or if their plan begins and ends with an online listing.

Be wary of vague answers about confidentiality, a request for a large upfront payment with no clear link to work performed, or pressure to sign in the first meeting. And notice whether they ask about you: your goals, your timing, what you want to do after the sale and whether you are willing to stay through a transition. A broker who never asks those questions is planning a transaction, not your exit.

• Agreeing with your price before seeing the numbers
• No clear list of likely buyers
• Vague confidentiality steps
• Large upfront fees with unclear work behind them
• Pressure to sign immediately
• No questions about your goals after closing

What a good first meeting looks like

A good first meeting feels more like an interview of your business than a sales pitch. The broker should ask for recent financials, ask how dependent the company is on you and on any single customer, ask whether sales have grown in each of the last few years and ask why you want to sell now. Those are the questions buyers will ask, so you want to hear them early.

You should leave with a value range and the reasoning behind it, an honest view of whether now is a good time, and a clear picture of the steps from listing to closing. If the broker thinks the company needs work first, they should say so, and if you want to test that yourself, how to tell whether your business is ready to sell lists the signs buyers look for.

Bringing these questions to us

We welcome every question on this list. Our discovery meeting is complimentary and lasts about an hour, at our Frisco office or by phone, and one of our partners reviews the last three years of financials with you and gives you a free low-to-high opinion of value. We will also tell you whether we believe we can sell your company for maximum value; if we do not, we will say so.

If you decide to go ahead, you will know who your contacts are, how buyers will be found and screened, and how long the process typically runs, which I describe stage by stage in how long it takes to sell a company. We work with owners across Dallas–Fort Worth, Austin, Houston and San Antonio.

Questions people ask me