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What is a business broker?
A business broker is someone who helps in the buying and selling of businesses. You can call them the middle men of a sale transaction between buyers and sellers. Brokers are similar to real estate agents, except they deal with the sale of businesses instead of properties.
What do business brokers do?
For a business buyer, they offer services such as:
· Consultation on what to buy, the process, as well as the legal and financial aspects.
· Scouring the market for the best business to buy within your budget.
· Approaching and negotiating with the seller on your behalf.
· Connecting you with the right people such as an accountant or lawyer to help buy a business.
· Assisting with the necessary paperwork to buy a business, as well as the contract of sale.
For a business seller, brokers can do more:
· Consultation on the current market, prices, financial and legal areas.
· Helping to prepare your business for a sale.
· Connecting you with the right professionals such as an accountant to help sell your business.
· Appraising a fair value of your business.
· Marketing your business for sale in a comprehensive campaign such as creating brochures, ads, online listings and others.
· Reaching out to their wide network of contacts to find a genuine buyer.
· Screening potential buyers to find serious ones.
· Negotiating for you to get the best deal.
· Helping you with the required paperwork to sell your business.
What’s so good about hiring a business broker?
· Business brokers have an extensive experience in business deals and can help you navigate a prolonged or complicated process to buy or sell.
· They are usually well-connected with a good network of potential buyers and sellers.
· You get to focus on running your business while your broker concentrates on selling your business at the best price in the timeframe you need.
· You can rely on their negotiation skills when hatching out a final contract.
· Business brokers are an external party to your business, which means they are objective and not emotionally attached to your business. This can be an advantage when selling your business or buying one.
· They can offer confidentiality if you prefer to remain anonymous in the initial stages of buying and selling.
How much do they cost?
Like all professionals, it depends on many factors such as your requirements and the services they offer. A business broker can charge hourly fees or monthly retainer fees.
Most tend to charge a commission in the form of a percentage of the sale price, which delays payment until a sale goes through. You’ll find some brokers or companies charging a flat rate fee instead, but be sure to read the fine print.
How do I choose the best broker to work with?
Before jumping into a criteria list, remember that the process of buying or selling a business can be lengthy. This means you will be working closely with your broker for 6 – 12 months under normal circumstances. Therefore, it’s imperative that you pick the person you feel most comfortable working with for the long term.
Apart from that, look for:
· Their qualification as different states in Australia have different rules for licensing and registration.
· Their experience and success rate. Pay attention to the amount of deals they have done, the size of their portfolio, and the quality of businesses they have dealt with.
· Their specialities such as industry and business sizes. Some brokers are good in a niche industry, while some specialise in certain business sizes.
· The services they offer, what they don’t cover and the end-to-end process. Make sure you understand what you are paying for.
· Their references such as past clients or search for word-of-mouth feedback.
· Their network or connections, as a wider reach means you can catch a bigger haul of buyers or sellers.
· Their professionalism and character such as whether they are trustworthy or easy to communicate and work with.
· Their final costs after factoring in all expected expenses combined with a buffer amount.