businessbroker

By Richard Parker | Diomo Corporation | Visit Website | About Author

The key question is whether or not a buyer or seller should use one altogether? Unless a buyer has already identified a specific business to purchase, or a seller has a particular buyer at hand, the answer is yes, a business broker should be used.

Unfortunately, there are far too many incompetent brokers, but that is common in any commissioned business. At the same time, there are lots of excellent ones. This discussion is not meant to focus on shortcomings of brokers, but rather why both a buyer and seller should utilize their services.

From A Buyer’s Perspective

A major misconception many buyers have is that business brokers represent them; they do not. Unless the buyer has engaged their services and is paying them directly, brokers either represent the seller, or the deal. That aside, a broker can be very helpful in providing buyer prospects with lists of businesses for sale. They can act as a buffer between the parties, and as importantly, they can help get the deal to the finish line. But again, buyers have to understand that a broker’s role is not negotiating the best deal for the buyer, or telling them which business is right for them to purchase, or which ones to avoid.

Brokers are paid on commission. If buyers do not buy, brokers do not eat. As such, it is only natural that brokers will focus on buyers who are well qualified and capable of getting to the closing table.

Business brokers also need to know that a buyer is serious about purchasing a business. They will need to have demonstrative proof that a buyer has the necessary financial resources to complete a purchase, and not just a promise from a buyer that they have the money.

Additionally, buyers cannot and should not rely solely upon a broker to gain access to businesses for sale. It is estimated that business brokers are only involved in a limited percentage of all small business sales altogether. Therefore, it is incumbent upon a buyer to seek out prospective deals on their own as well since not every business for sale will be represented by a business broker.

From A Seller’s Perspective

I have personally purchased 13 businesses and have sold eleven of them. Except for one or two cases, I have always used a broker. It is not that I necessarily needed their expertise. As someone who has been in the business buying and selling sector for over 25 years as a broker, author of nine guides and advisor to buyers and sellers, I know how to get deals done. So why then would I need a broker? It is simple, sellers have to realize that their business may not sell. Or, it could take upwards of a year to complete a deal. The last thing a business owner should do is get distracted from running their business during the sales process.

Hiring a broker, the right broker, to be the liaison to prospective buyers, to qualify them, explain the business, assist initially with a valuation, to assemble all of the necessary documentation needed to close a deal, are all very time-consuming tasks. Allowing an experienced third-party to oversee these tasks will allow the seller to continue to operate their business. If you get distracted from the business it is likely the business will decline and that will make it infinitely more difficult to sell.

Summary

Business brokers have a very specific role to play in the business buying/selling process. By engaging the right one as a seller, or by using the right one as a buyer, they can add a lot of value to the process and assist in getting the parties to a successful closing.

ABOUT THE AUTHOR

Richard Parker is the author of the How To Buy A Good Business At A Great Price© series – the most widely used reference resource and strategy guide for buying a business. He has personally purchased thirteen businesses and his company Diomo Corporation – The Business Buyer Resource Center™, provides consulting and brokerage services to business buyers and sellers in more than 80 countries.