If you’re considering selling your business or buying a new business, it won’t be long before you begin to wonder if you need a business broker to handle the deal. Whether or not you really need a business broker depends on how much of the deal you intend to handle yourself. The following article covers some of the issues you should think about when trying to decide if a business broker is someone you need or someone you can do without.
Exactly what are business brokers anyway? Business brokers are firms or individuals who take care of the details when businesses are bought and sold. Brokers are a third party in the transaction–that is, they aren’t the seller or the buyer of the business in question. They function in the same way as real estate agents. Their role is to bring together sellers and buyers, expedite the negotiations and handle the details of the transaction in the event of a successful deal.
Good Reasons to Work with Business Brokers
There are some excellent reasons why you should consider using business brokers instead of going it alone in the transfer of business ownership. The advantage most people site is time savings. The sale or purchase of a business can be a time-consuming affair. Gathering the required documentation alone can take what seems like forever. Business brokers have a lot of experience assembling these documents on your behalf, which frees you from taking the time to do it yourself.
The qualification of prospects is another area where using business brokers has the advantage. It’s particularly frustrating when you spend time courting someone who seems like a serious prospect, only to find out they don’t have the means to purchase your business. If you want to be sure that you only work with buyers who actually have the capability to purchase, then you can let your business broker know that you only want to talk to qualified buyers.
Most skilled business brokers keep an up-to-date list of prospects who are ready and able to purchase your business. In some cases, there might not even be a need for advertising or listing your business for sale. If you’re in the market to buy, brokers should have a portfolio to offer you. Once again, you see how using the services of business brokers can streamline the entire process.
When you enlist the aid of a business broker in the purchase or sale of a business, you’re also accessing their experience. For some business buyers, this is not an important issue–they already have experience buying businesses. However, business sellers are often less experienced in this type of transaction because people generally take the role of a seller less often. Brokers have accumulated a great deal of experience through many transactions. There’s a good chance you will be able to benefit from their experience.
Finally, business brokers can help you maintain confidentiality. The larger your business happens to be, the greater the need for confidentiality in the sale process. The whole deal could be negatively impacted if news of an impending sale becomes too widely known. It could cause fluctuations in the offers and also demoralize your employees. Business brokers are well-practiced at keeping these sales confidential.
Reasons to Avoid Working with Business Brokers
Most business brokers are honest, legitimate businessmen who happen to succeed when you do. In most cases you will share common goals (the sale or purchase of a business). Business brokers thrive on referrals and recommendations, so they want your experience to be positive. However, there are reasons why you might want to avoid signing up with business brokers for the sale or purchase of a business.
Working without a broker may end up costing you less. Keep in mind that business brokers earn money through their commissions on the sale of a business. The amount of work they put into the transaction certainly is worth some amount of compensation. Either the seller of the business or the buyer will be responsible for paying a commission to the business broker.
Sometimes you have to wonder what a business broker’s true motivations are. Normally business brokers work on behalf of one party or the other. His business and perception of successful depends on his ability to facilitate successful negotiations and complete a sale. You probably don’t have to worry about getting factually incorrect information about a business from the broker, but you do want to watch out for “spin” that makes things sound more attractive than they might be.
In some technical, specialized businesses, brokers might not possess knowledge of the industry details that is needed to successfully complete a sale. If you’re in the market for a business that is based on specific industry knowledge, then you might be better off working on your own instead of spending all your time educating the business broker.
Finally, remember that the one person in the group who has a passion for your business and is keeping your best interests in mind…is you. However, at the same time, passion and focused self-interest might not provide the best support for a successful sale. You may want to hire a business broker simply for the emotional detachment he’ll bring to the deal.