Seller’s business broker – job description
The listing contract signed between a seller and the business broker entitles the latter to a commission that is dependent on the broker’s success in finding an appropriate buyer for the business, at the best value for the seller. To fulfill this mission, the business broker usually takes the following course of action:
1) The broker and the seller sign a Representation Contract, which includes:
- the parties’ official identification
- the obligations of all parts involved
- the start and end date of their collaboration
- the Exclusivity Clause
- the Non-Disclosure Agreement;
- the quantum of the broker’s commission.
A broker's income is largely based on commissions, which are conditioned by finding a suitable buyer for the business on sale, by successfully negotiating a final contract between the parties, and by completing the transfer with a profitable transaction, through the Escrow Agency.
Commissions are always negotiated between the seller and the business broker and can be settled either as a fixed amount, or as a combination between a percentage-based payment and a fixed fee, especially in the case of small businesses, multi-million companies or some special assets. All details must be included in the Representation Contract.
2) The broker prepares both the company and the seller for the transfer process and the negotiations with the potential buyer. He also guides the client through the entire selling process and makes recommendations on how to improve it.
3) The broker prepares the documents necessary for a successful business sale. He offers the Seller a business overview questionnaire and other important business evaluation surveys.
4) Based on the information provided by the seller, the broker writes a comprehensive Information Memorandum - a 15-30 pages document that presents the business to potential buyers. Additionally, the broker creates the financial statement of the business and prepares the Annexes of the Business Sale Contract:
- Authorizations, Approvals and Functioning Permits;
- The list of pending payments and other financial obligations;
- The list of necessary utilities branching;
- The Employee Registry, including roles and wages;
- Inventory of all psychical assets and material stocks;
- The list of real estate properties and/or the lease contracts;
- Other information, depending on the business nature.
5) The business broker can bring into the seller’s team, upon his request or approval, specialists from various backgrounds: financial advisers, accountants, lawyers, real estate agents, evaluators. In other words, companies and people specialized in all necessary consultancy fields.
6) The broker proposes a fair price for the business. Most business owners do not know exactly the market value of their company, as such an evaluation is quite complex. The broker can help the seller understand the real financial value of the business and set the best possible price. If needed, an ANEVAR specialist can be contracted, but these services will be paid directly by the seller.
7) Upon request, the broker assists the seller in collaboration with banking institutions, in the process of prequalifying the company to the possibility of financing a potential buyer. This will increase the marketability of the business and enable the process of finding a buyer.
8) Based on the Information Memorandum, the broker formulates a short listing announcement, called a Teaser, which will be published along with other presentation materials, with the goal of finding a potential buyer.
9) The broker will promote the business on specialized web sites other appropriate mediums. He also updates the company related data and the online listing, any time needed.
10) The broker prospects the market to identify potential buyers and starts a selection process, to ensure that they are financially qualified to finalize the business transfer. As the seller’s representative, he acts as a main contact person regarding the listing and is available to answer any questions about the company.
11) When a potential buyer wants more information about a listing, he is scheduled to sign an NDA, together with his broker, in order to receive the Information Memorandum (IM).
12) The broker schedules all business presentation meetings. He assists the seller and his team during these meetings and in the relation with potential buyers.
13) The broker presents all interested parties their respective offers and counter-offers. Then, he helps his client select the best proposal.
14) After selecting the buyer, the business broker assists the seller during the following negotiation steps (including price and terms settlement) and through the buyer’s due diligence process.
15) After the two parties reach a comfortable agreement, the broker supports the seller during the business transfer process, through the Escrow Agency, until the final documents are signed and the transaction is closed.
16) After confirming the success of the transaction, the broker collects the commission agreed upon in the Representation Contract.
Regardless of the technical aspects of such a profession, the most important service business brokers offer their clients is the real possibility for the latter to continue focusing on running their company throughout the entire transfer process, which can last between 4 and 12 months.
TradeX Business Brokers are always ready to answer any additional question you might have!