What is a Business Broker?

A business broker helps people buy or sell businesses. In many ways they are similar to a real estate agent, but their job encompasses much more than that. Like a real estate agent, they may represent either the seller of a business, or the buyer, and in some cases both. Dual agency is usually limited by state laws to prevent conflict of interest, but you should check in your state if this is allowed and what rules they must follow. The principle, the buyer or seller, hires a business broker to accomplish several different things.

Finding a Buyer or Seller

The broker will advertise a business for sale for the seller and may pre-screen the potential buyers. Pre-screening eliminates people without the financial means to make the purchase, along with casual inquiries that are unlikely to lead to a sale. When representing a buyer, the broker will help to find a business that best meets their principal’s desires.

Confidentiality

In the process of selling a business, it is necessary to keep much of the activity confidential. There can be a profound effect on the value of a company, as well as its employees, when it becomes known the business is for sale. Using a broker can prevent this information from becoming publicly known and they can prepare a summary describing the business without divulging identifying information about it for advertising purposes.

Pricing the Business

Business brokers are able to help both buyers and sellers in setting a MPSP (Most Probable Selling Price) for a business. This is a difficult and skilled assessment and can often be incorrect due to the close involvement of the seller or the wishful thoughts of the buyer. Obviously, any seller wants to get the best price possible and has a deep emotional investment in the company they now own. This can lead to overpricing. While a buyer wants the best possible deal. This can lead to conflicts which the broker, with less personal involvement and more experience, can help resolve.

Financing the Purchase

Most purchases have some financial component such as a small business loan or bank loan. Business brokers keep track of the availability of these sources of funding and will help their principle navigate the paperwork necessary to secure it. In more complex transfers they can act as intermediaries or assist in getting legal help for any specific needs.

What Don’t They Do?

Typically, business brokers do not have power of attorney for their clients. That means they can’t sign agreements for you or close deals without your participation. They are regarded as agents for their principals, and operate under the laws governing agents, as well as other laws as defined by the individual state you are in. Be sure to check what qualifications and duties your state requires of a business broker.

Like a real estate agent, the business broker gets a commission from a successful sale, although there may be other fees involved as well. Be sure you review all the costs of hiring before choosing your broker. While the commission charged may seem large, it is well worth it if your business purchase goes smoothly due to their help. For more information on finding a business broker, either as a seller or buyer, contact a Sunbelt office for details.

Related reads:

Stay Up-to-Date on The Latest
Subscribe to our newsletter and never miss our latest news.

"*" indicates required fields

Select your subscription list
This field is for validation purposes and should be left unchanged.