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Business brokers (also known as business transfer agents or intermediaries), assist buyers and sellers of privately held small business in the buying and selling process.
Traditionally, the broker provides a conventional full-service, commission-based brokerage relationship under a signed agreement with a seller or “buyer representation” agreement with a buyer. |
Selling a business is usually a very intimidating and time-consuming process. What are the benefits of using the services of business brokers and what is the brokerage process involved?
Benefits of Business Brokers
The agency relationships in business ownership transactions involve the representation by a business broker (on behalf of a brokerage company) of the selling principal, whether that person is a buyer or a seller.
The principal broker (and his/her agents) then become the agent/s of the principal, who is the broker’s client. The other party in the transaction, who does not have an agency relationship with the broker, is the broker’s customer.
There are many benefits that brokerage could offer:
1. Offering insight into valuing a business
Business brokers have extensive knowledge of what businesses are worth and can usually derive a value that is accurate. With the help of a broker, sellers can precisely place a realistic valuation on their business.
2. Attract buyers
Most of the brokers have a database of buyers and send out business-for-sale alerts to their database whenever they have a new business listing.
3. Help in presenting the business
Since most of the brokers can adept at packaging and marketing a business to show it in its best light, a seller may be able to market their business in a way that is attractive to buyers.
4. Confidentiality
Professional brokers work in a confidential manner, keeping the sale of the business quiet so that competitors, employees, suppliers and others are not informed that the business is for sale.
5. Experience and Skillful Negotiators
A broker handles the technical aspects of the sale such as structuring the transaction and liaising with other professionals that help in the selling process.
As you can see, in the process of selling small businesses, the service of business brokers does bring some convenience.
Business Brokers Brokerage Process
Once a business broker brings an interested buyer and seller together, the succeeding brokerage process can be broken down into a five-step process, described by Garai and Pravda in Mergers & Acquisitions, March/April 1994.
The 5 steps process of a brokerage are:
Step 1: To set a target for completion of the transaction
Step 2: Close price gaps that inevitably arise during the negotiation.
A price gap is the difference between what the seller wants and what the buyer is willing to pay.
Step 3: Overcoming “seller’s remorse.”
Seller’s remorse commonly occurs during the latter stages of negotiations when the seller suddenly realizes that he is relinquishing control of the company in which he has invested part of his life. Seller’s remorse can kill the deal if the broker fails to confront it early in the negotiations by assuaging the seller’s particular fears or concerns.
Step 4: Due diligence
This is whereby various legal requirements are identified and addressed.
Step 5: Signing the purchase/sale agreement
This last step, the broker helps the buyer and seller iron out and sign a final contract. This stage is the one most likely to entail the use of attorneys on both sides, even for smaller transactions.
For further info about business brokers, you could refer to:
1. Sunbelt Business Brokers
Sunbelt Network is the world’s largest business brokerage firm with over 300 offices in United States and 30 foreign countries. Sunbelt has a team of seasoned business brokers who provide expert advice in buying and selling of businesses or franchises.
(http://www.sunbeltbroker.com/)
2.
EMPIRE Business Brokers is an international network of Business Brokers that are dedicated professionally to the sale and purchase of on going businesses and franchises, as well as consulting services for Buyers, Investors, Entrepreneurs and Franchises.
(http://www.empirebb.com/usa/indexusa.php)
3. Business Broking Solutions (BBS)
Business Broking Solutions (BBS) targets the right businesses, determines its true value and negotiates the transaction: benefits from working with the industry’s leading professionals.
(http://www.businessbrokers.com.my/)
As with any other business transactions, there are some tips or advice when you want to engage the services of business brokers, which are:
1. Get Referrals: Ask your accountant, lawyer, peers, and industry association for names of good business brokers.
2. Find a Specialist: Find someone who is dedicated to the profession. If your company value may be worth millions, consider merger and acquisition intermediaries.
3. Practice Due Diligence: Examine your broker’s background, experience, and credentials.
4. No Heavy Front Fee: Avoid any broker asking you for a large, upfront fee to assess your business value or start an application process.
5. Avoid the Pressure: Do not make a rush decision.
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