Buyer’s Business Broker – Job Description
A business broker has a very specific and important role in the business transfer process. This article briefly explains both the responsibilities associated with this profession and the way brokers contribute to successful business transfers.
A buyer who wants to purchase a business will sign a consultancy contract, which is the base for all future collaboration between the business broker and the buyer. The income of a broker is based on the commissions earned from completing successful transactions, which is a sufficient motivation to find a business in the requested area, at a fair price, under the most advantageous conditions for the buyer.
To make this happen, the business broker will take the following steps:
1) The business broker prepares the buyer for the process of acquiring a business and contacting the potential seller. He guides his client through the entire buying/selling process and also recommends solutions to improve it.
2) He offers the buyer a survey, designed for a better understanding of what he wants to buy, and fills the necessary forms and documents.
3) Based on the information gathered through the questionnaires, the business broker pitches businesses ready to be sold, using a teaser version (business summary) and guides the buyer through the selection process.
4) When needed or/and if the buyer requests it, the business broker will bring requested specialists into the team, such as financial advisers, accountants, lawyers, real estate agents, people and companies specialized in all necessary areas of expertise. The terms of collaboration and payments to these third parties will be negotiated directly by the buyer, assisted by the business broker.
5) After the buyer (and his team) decides which businesses are of interest for him, the business broker will contact the seller or its representatives and request the full information package: the Information Memorandum. Afterwards, the Non-Disclosure Agreement will be signed for each information package received.
6) Based on the data from the Information Memorandum, the business broker and the buyer will select a business suitable to their needs and start a detailed analysis process.
7) After selecting the business, the broker schedules a meeting with the appropriate stakeholders. He is also assisting the buyer in his relationship with the seller and during the due diligence process.
8) The business broker assists the buyer during the negotiations of the price and transfer conditions. Upon the buyer’s request, the business can be assessed by a valuation expert. The cost for this can be covered solely by the buyer or the beller, or it can be split between the parties. These terms will be stated as a separate clause in the final acquisition contract.
9) If requested, the broker assists the buyer in the funding pre-qualification process with the bank that already preapproved the business for financing. If this pre-qualification process is not possible, there are plenty of other options to be considered.
10) The business broker helps the buyer create the Letter of Intent for a business transfer. Part of the final Buying/Selling Agreement clauses will be specified here.
11) After the negotiations result in a bilateral agreement, the business broker helps the buyer to honor the financial guarantee needed to start the due diligence and transfer processes.
12) The business broker assists the buyer during the whole business transfer process, through the business transfer office, until the final documents are signed and the transfer is finalized. During this time, the buyer needs to get:
- The list of pending payments and other financial obligations;
- Authorizations, approvals and functioning permits;
- The list of necessary utility branching;
- The transfer of employment contracts;
- Inventory of all physical assets and material stock;
- The official transfer of the Property, Lease or Rent Agreements;
- Other particular documents related to the business activity.
13) The business broker receives the success commissions, as per the consultancy contract.
In most cases, buying an existing business is a much safer strategy than starting one from scratch. When you buy a business, you take over an already working operation that generates profit. There is already a client database, a reputation, and employees who have the know-how of the business. You do not have to re-invent the wheel by recreating procedures, systems, and policies, because a successful business management methodology is already tested and in place.
Our business brokers are always ready to answer additional questions that you might have, so do not hesitate to get in touch!