There are many reasons why a business owner might choose to sell their business: they might need funds for personal reasons, or they want to switch to another type of business that they deem to be more profitable, or they might be moving to another location and their current business is more suited to the location that they will be leaving behind. When a business owner chooses to sell their business, they might choose to hire the services of a business broker.
What is a Business Broker?
Business broker are also called business transfer agents, and they act as intermediaries to assist business owners who wish to sell their business. They will function as a go-between from the business owner towards potential buyers of the business and ensure that the transaction goes as smoothly as possible so that both the seller and buyer will benefit from the arrangement.
Traditionally, business brokers provide a full-service brokerage relationship that’s commission-based. They act as representatives for both the buyer and the seller, and they act under fiduciary obligations which means that they are legally obliged to act in the best interest of both parties involved in the transaction.
In the United States, business brokers can act as either traditional transactions brokers or work as a dual agency. Transactions brokers will not represent either party as a specific client, but would rather function as a facilitator for communication and negotiations on behalf of both parties. In this role, they are paid by both the seller and buyer for their rendered services.
If the business broker is acting as a dual agency, they are representing both the buyer and seller underwritten and signed statements from both parties. The federal law that covers this arrangement can vary from one state to another. In some states, state law requires that both buyer and seller are present for each transaction, and during this process, a business broker will function as a dual agent. In other states, notably in Maryland, an agency can handle a business brokerage deal, but will require that the transaction be handled by different agents with one agent representing the buyer and another representing the seller. Each agent is designated as an “intra-company” agent. However, this can be problematic since conflicts of interest may arise as each agent will try to find the deal that will best benefit their own client.
What Services do Business Brokers Provide?
There are several services that a business broker will provide for you, namely:
- Analyzing your business SWOT
A business broker will help you break down the SWOT of your business: Strengths, Weaknesses, Opportunities, and Threats. By doing a SWOT analysis, they can help you highlight your business strengths and identify possible opportunities to make it more attractive to potential buyers. They can also help you identify weaknesses and threats to your business so that you are in a better bargaining position if there is an interested buyer.
- Screening potential buyers
Business brokers will help you weed out buyers who might not be serious about inquiring about your business so that you won’t need to spend time and effort answering questions or fielding calls from people who are just looking to waste your time.
This is where business brokers will really earn their fees. They will help ensure that the communication between buyer and seller is moving and will step in to smooth any problems as they arise.
- Paperwork Assistance
Business brokers will be knowledgeable about the legal and administrative side of the process. They know about the current laws and regulations covering your deal, and they are able to quickly acquire the necessary permits. Using a business broker will also help prevent missing out on crucial but tedious steps such as filing paperwork and paying fees.
How do I Find a Suitable Business Broker for Me?
Here are three steps that you can take in order to find a suitable business broker for you:
- Get Referrals from a Trusted Source
One of the best ways to find a good business broker is by getting feedback from people who have used their services before. Ask your accountant, lawyer, or friends in the same industry if they have any referrals for you.
- Check the IBBA
If you’re unsure where to find a trusted broker, you can check the International Business Brokers Association (IBBA). This non-profit provides a network of business brokers, as well as advice and tips on finding the right business broker for you.
- Do your Homework
Once you have a potential business broker in mind, you should also practice due diligence and research everything about this broker that you can. Check their background, their experience, and their past track record as a business broker. You will be able to get an idea of the quality of their work, their ethics, and their dedication to their profession.