A business broker is a crucial part of buying a business, but what do they actually do?
The first thing we need to realize is that most of the time a broker is involved in the sale of a business. However, a seller is not required to use a business broker to sell a business, so not every deal will involve a broker.
Any business owner can place their company for sale on sites like BizBuySell and sell it themselves. Just because someone does not have a broker, does not mean it is not a real opportunity.
I have been involved in transactions with a broker and without one and I will tell you I really prefer when a broker is involved. They just make things go so much smoother.
What does a business broker do?
A business broker is a professional who helps facilitate the sale of a business by working with both the buyer and the seller. Business brokers are hired by the owner of the business to help find a suitable buyer and negotiate the terms of the sale. They can also assist with valuing the business, preparing it for sale, and handling all of the necessary paperwork and legal requirements.
A business broker does lots of things during the sale of a business, here are the main things they do:
- Get Ready to Sell – Help the seller get a business ready for sale and help the seller value the business
- Find Buyers – Publicize the business for sale and find/screen people interested in buying that business
- Find Sellers – You can register with a business broker and if they find what your looking for, they will contact you
- Meeting – Helping the seller set meetings with potential buyers and show the business
- Offers – Assist the seller in evaluating the offers
- Guidance – Providing transaction guidance, creating documents, and getting everyone to the closing table so the company can be sold
This is a simplified list but it gives you an idea of what they are doing. In my experience, it was always easier to buy a company when a broker was involved because they made the deal go much smoother. For me, I would always prefer a deal with a broker involved because it is easier to get a deal done.
Expert Tip – When you are serious about buying a business ask brokers in your area to put you on their buyer’s list. This way, you will be notified about businesses for sale before the broker lists them and you can get a leg up on other buyers.
Why a business broker is very helpful
One of the main advantages of working with a business broker is that they have a wealth of knowledge and experience in the process of buying and selling businesses.
They can help you understand the current market conditions and provide valuable insights into the value of a business. They can also help you navigate the legal and financial aspects of the sale, which can be complex and time-consuming. Also, a business broker has a pretty good feel for what types of businesses are available now as well as what may be coming up in the future.
Expert Tip – If you need to find a business broker in your area a good resource is the International Business Brokers Association.
What else do I need to know about a business broker?
- A business broker is paid by the seller from the proceeds of the sale
- Brokers in my experience are honest and want both parties happy with the deal
- If you have questions for the seller, go through the broker, don’t contact the seller directly
- Most states have laws on what a business broker can and can’t do
- Don’t ask about businesses you know you can’t really buy – brokers will think you are not serious
- THE BUSINESS BROKER LEGALLY ONLY WORKS FOR THE SELLER
I highlighted the last bullet because it is very important for buyers to understand this fully. One of the main reasons we created BizBuyerCentral is to help people get the knowledge to understand how to buy a business.
A business broker can help the buyer, but they work for the seller and represent the seller’s best interests.
Final thoughts on business brokers
Though most business brokers will help you understand how to buy a company, it is always better if you have an understanding of how it works before you contact them.
One more thing you need to know about a business broker is that they get the information they have from the seller. It is your job to do due diligence on any information you are given about the business.
Now go out there and find a business!
