3. Business Brokers – How Can They Help You?

posted on 10 July 2020
Cum te ajută un broker de afaceri?
Dan Crivat

One of the most frequent questions asked by prospective business buyers is whether or not should they hire a broker. Our experience reveals the fact that a business broker can have a very important and specific role in the acquisition process.

The seller of a business is almost always represented by a broker during the transfer process, the latter being paid a commission; even if they are indirectly assisting you in the process, they have in fact a fiduciary duty to the seller.

Why should you also hire a broker?

Keep in mind that business brokers work like real estate agents in almost every sense. They represent a seller or a buyer, that is, the person who hired them and will pay their commission. If the seller has a broker on his team, it is advisable that you hire one, too. The broker’s payment is a commission of success, paid only when the transaction is closed. Therefore, you can be sure that the broker’s interest is to finalize the business transfer, under the most favorable terms for you and at a price as accurate as possible.

Experienced business sellers and buyers hire brokers in almost every transaction. Beyond businessmen’s and women’s savviness, there are still time consuming, yet important tasks to be resolved by the broker:

Listings of Businesses For Sale

A good broker can provide you not only with access to listings for businesses that are on the market, but also with details about them that you may not be able to uncover on your own. There are businesses for sale that are not publicly displayed on specialized websites, due to the vendor’s desire to maintain maximum confidentiality. Even the businesses that are “on sight” have a brief form of listing for the same reason. Therefore, you, as a potential buyer, definitely need a business to access this information and to make a list of possible businesses that interest you, based on the formulated criteria.

It’s Always a Good Idea to Have a Buffer Between You and the Seller

Brokers act as an intermediary to help deliver bad news to the seller. There may be instances where you have to retract or modify an offer and there will certainly be times where you will need to adopt an aggressive negotiating position. Since you will most likely need the seller’s support after the purchase (as per contract), it is not a good idea to put much pressure on your relationship. As such, let the business broker deliver the bad news!

Paperwork Is Overwhelming

The purchase of a business, no matter how small, requires a tremendous amount of coordination and document chasing. The data needed from a seller to evaluate a business, the documentation required to close a deal and following the paperwork trail can be tremendous work. An experienced broker, familiarized with the workflow, will be an enormous help in successfully closing the deal.

Collaborating with the Right Broker

A business broker will offer you the necessary tools and assistance in making a decision. However, at the end of the day, keep in mind that the decision to invest is yours to make!

The broker cannot afford to spend countless unpaid hours searching for the right business for you. They may suggest common things to look for, but they will not play detective.

The added value a broker brings to the selection process of potential investments resides in a realistic evaluation of the business of interest. Further on, the offers and negotiation are team work, but you are the main player.

Here are a few questions you can ask when interviewing brokers:

  • How experienced are they?
  • How many transactions have they been involved in?
  • Have they ever owned a business?
  • Do they specialize in a particular business type?
  • What references can they provide?
  • How many clients are they working with presently?

Collaborate with Your Broker

Once you decided on a collaboration, call up the broker and set a meeting. Keep in mind that you want him to help you find the business listings tailored to your specific needs. However, to get there, you need to be clear about your expectations.

Show them you’re serious. A business broker wants to be sure that if the right opportunity comes along, you’ll be ready to buy!

  • Show that you are serious about buying a business. A broker needs to be sure that, once presented with a suitable opportunity, you will be ready to get things going!
  • Prepare a list of the types of businesses you are interested in purchasing.
  • Tell them precisely how much money you can invest.
  • Ask them for suggestions as to how you should conduct your search.
  • Keep in touch.
  • Ask the broker to verify the first couple of businesses that you locate on your own. See how long it takes for them give you data or follow up with you. If it takes longer than a couple of days, use someone else.

If you find a business for sale on your own, do not think you no longer need a business broker. The most demanding stages of the transaction start only now, ranging from managing your relationship with the seller to the successful transfer of the business.

This is the big difference between a real estate transaction and a business transaction. In real estate, once you find what you want to buy, the deal is almost over. Conversely, when you buy a business, deciding where to invest is just the beginning of a complicated transactional process.

A first-time buyer might find this information very difficult to understand and manage. This is where the true value of a professional business broker becomes evident! When used effectively, a broker can be a solid asset to help you complete the deal. Likewise, if your broker does not demonstrate a serious commitment to follow up on your requests, then find another collaboration.

But remember, no matter how effective a broker is, buying the right business is ultimately, entirely in your hands!

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