Business brokers are those people who act as intermediaries between the buyers and sellers during the selling or buying of privately owned businesses, both small and medium-sized. They are people who have the right level of education, a background in business, and ideally, should have received some training in business brokerage from professional bodies.
A business broker should also help in valuing a business so that a correct price is arrived at. They must also be able to market the business they have been asked to help in selling, and need to maintain strict confidentiality, while they are advertising the business. When they initially meet prospective buyers of a business, they may not tell you the name of the business being sold or its owner, until they are sure of the interest being shown in such sale.
Business brokers will be required to ultimately introduce the prospective buyers once they have shown interest and seriousness, and facilitate meetings between the business owner and its prospective buyers. Once an offer is made, they handle negotiations, mediate the Due Diligence phase, and eventually move everyone forward to scheduling and closing of the transaction. They may be asked to draft business reviews to provide to prospective buyers, but need to ensure that proper confidentiality agreements are signed before such reviews are handed over.
Most business brokers work on commissions and will receive this commission after the business has been sold. These commissions generally are in the range of 10 percent but can be negotiated. Smaller businesses will attract higher commissions. Sellers need to factor in these commissions as costs before they decide on the viability of the price being offered by the buyer.
Brokers should be engaged for the buying or selling of a business only after vetting their experience, professionalism, and often specialization in a particular niche. They may develop these specializations after having sold or bought some businesses previously in that niche, and this enables them to get an insight into that particular industry or business and gives them valuable insights into their viability, the competition, the profitability, the market and other factors that can often make for vital information that buyers, many of whom are investors, may find useful.
Once you have decided on the right broker, you will need to give him or her, complete financial, commercial, marketing and other information about the business you are trying to sell, and expect that this information will be kept confidential and only passed on to buyers who look like serious candidates. Brokers must be able to judge the financial capacity of such buyers and the seriousness of their intent to buy and run the business. There is, unfortunately, a class of investors, who look for businesses to buy, which they can strip off its assets and sell them further for a profit. While this may still bring the seller his desired profit, the transaction borders often on the unethical.
Most business brokers work on the side of the seller, but as they are in the business of buying and selling businesses, they will always have information about businesses that are on sale or likely to come into the market, and investors often make use of this knowledge to help them to buy into profitable businesses. Brokers will need to go into the details of the background of any prospective buyer and determine whether they have earlier bought businesses and run them. They must be sure that the buyer has the financial capacity to buy the business that is for sale or at least is in a position to arrange the necessary finance as soon as possible. They will always like to be shown proof of such financial capacity through bank statements or other documents. They must also be able to judge whether the buyer is willing to make the purchase in a short time so that the seller is not inconvenienced in any way.
Once the broker finds that the buyer is serious about his intentions he can then present the details of the business for sale after a proper non-disclosure agreement is signed. This is necessary, as often the sale of business leads to a changed perception about the business in the market and this can have an effect on their present operations. Brokers act as a point of contact between the buyer and the seller, and often the first meeting between the owner of the business being sold and the prospective buyer comes about when final price negotiations are in progress.
Once a business broker has gathered all the necessary details of the business that he has been commissioned to sell, he will take all necessary action to find buyers, vet their credentials, and often play one off against the other to get a better price. After all, the higher the price, the higher the commission, and therefore the increased commitment of the broker to the sale process. As business brokers go forward in their business, they tend to build a database of investors and buyers, and often when a business owner does contact them for selling the business they will often be able to provide them immediately with a list of likely buyers interested and capable of buying the business. This can greatly speed up the process.
Business brokers are also capable of coming up with marketing plans to sell the business in question. They can be of great assistance in preparing a proper valuation of a business, something often owers themselves are rarely aware of. They will know about the money they have put into the business, their assets, and liabilities, but may find it difficult to make a judgment on factors like brand value and market perception of a business that can often greatly add to its value, or in some instances be negative.
Businesses have to be priced right for them to sell, and a good and experienced business broker can go a long way in ensuring that the business is properly appraised and a correct valuation arrived at before it is offered up for sale. If you live in the Tampa Bay Area, consider Tampa Business Broker, Dave DeCamella, who has a decade’s worth of experience helping entrepreneurs buy and sell busineses.