What Does a Business Broker Do?

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Business brokers are professionals trained and experienced with assisting people buy and sell businesses. They come up with an estimated value of a business, market it, and assess potential buyers. The possession of a broker license depends on the state that the business broker operates within.

There’s a chance you’ve encountered a real estate agent when buying or selling a home. Now, a business broker has a role quite similar to that of a real estate agent. However, the role of business brokers is more complicated as it involves selling or buying a business.

Here are some of the roles that business brokers play

Contacting and negotiating with buyers

Business brokers are marketing experts who can widen your pool of potential buyers or sellers. They reach out to numerous potential buyers using a variety of direct or public listed contacts and leads. Also, it’s the responsibility of a business broker to conduct negotiations with other parties and can filter out incompetent buyers.

Business brokers discreetly reach out to your competitors and investors; give them information regarding your business while remaining confidential about the name of your business and other fine details.

Business valuation

While marketing and conducting negotiations on behalf of sellers, Business Broker, Orlando are qualified to value your business and estimate the company’s full value. Business valuation is essential because it determines the price to be paid or received to validate the business sale.

Asking price maximization

When selling or looking for a business to buy, you will want to maximize their chances of a good deal. Business brokers will advertise your business to help you gain numerous potential buyers while maximizing the starting price. When genuine potential buyers express high interest in your business, you will most likely yield a higher deal than usual. It gives you the power and a stronger position while negotiating the terms and conditions of the sale.

Confidentiality

Business brokers have access to both business and client information, some of which could be highly sensitive. One of the critical roles of a business broker is maintaining confidentiality on such details. It is vital to have a confidentiality agreement analyzed by an attorney and signed by both parties before revealing any information. As the business owner, you reserve the right to determine what information you disclose to buyers and the appropriate time. A professional business broker will also guide you on the same.

Financing

In the past few years, business acquisition loans were hard to secure, unlike the present times. Business brokers stay informed on the best sources and types of loans useful to prospective buyers. Besides, the brokers guide buyers on the process of acquiring the loan and assist them in arranging to finance.

Guiding business owners through a sale

Business brokers have extensive experience buying and selling businesses, which could benefit business sellers whether they have sold a business before. They stay updated with the business trends that are not known to the seller. If you intend to sell your business, ensure you take advantage of your broker’s knowledge on such sales to learn and avoid possible mishaps during the sale. Get to know the critical processes of due diligence and any other thing regarding the deal that you should complete in a set period.

Commissions for business brokers

Business brokers determine the rate to charge for their services. The standard rate is 10% of the selling price, but it may change depending on business complexity on sale. The fee is usually paid to the business broker once the company is sold. It is essential to have a ‘listing agreement for the exclusive right to sell’ that explains the fee in detail, and the business owner signs before the broker offers the services.

When searching for a business broker, find one with exceptional sales skills and strategy, as well as a confidentiality plan. Besides, seek to know how and where the business broker plans to market your business. It’s also important to know how the broker will find and screen prospective buyers or businesses to purchase. 

Professional business brokers should clearly outline their strategy and budget. In addition, they should explain their strategies to ensure confidentiality during the entire process. Moreover, a reputable business broker should have a solid screening process. This should allow them to narrow down the field of prospective businesses or potential buyers. Such qualities are essential, as they allow you to concentrate on other activities, rather than wasting your time and resources prospecting for businesses to purchase or unqualified buyers. 

Bottom Line

Note that some brokers will ask for an upfront fee to cater for the time and expenses used while analyzing financial statements, preparing an advertising package, valuing the business, among other services. The amount varies between brokers and should be deducted from the commission once the sale is made.

However, most brokers will not ask for an upfront fee due to the uncertainty that the business will sell. They list the company that they feel confident about and charge the total payment after the sale. In other instances, your broker will co-broker with another professional broker, which will have no cost implications on the seller. The fee to pay at the end of the sale remains the same.

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