Brokers and Professionalism

What is a Business Broker?
A business broker is an agent who arranges the buying and selling of businesses on behalf of a client. The broker is a specialist, with skills that can assess a business for sale, organise parties interested in purchasing the business, deal with the potential buyers, and also the client (the seller). Therefore, business brokers act as mediators between two parties; the buyers and sellers of businesses. They are responsible for most of the businesses sold today.

Great need for Professionalism
There has never been a greater need for professionalism in Business Broking as there is today. Business Brokers, like any other broker, bring buyers and sellers (of businesses) together. Brokers work on a commission basis (anywhere from 4 - 15% of the sale price) and are under contract to the vendor (seller).

This means the broker primarily represents the vendor's interest and is contracted to arrange the sale of the vendor's business at the best possible price and in accordance with the instructions of the vendor who is his principal/client. The broker also has basic obligations to the buyer for fair dealing and honest representation of information from the vendor.

Business broking is a profession, which provides a much more interesting and professional platform to work from then the less exciting and boring dealing in real estate. Both real estate and business broking work possess the same five elements:

  • Listing.
  • Appraisal.
  • Marketing.
  • Sale.
  • Settlement.

Training Required
A qualified professional business broker must have training and experience in the following areas:

  1. How to own/run a profitable business.
  2. Profit & Loss Accounts.
  3. Balance Sheets.
  4. Leases.
  5. Basic business law including contracts.
  6. Appraisal or valuations of businesses.
  7. Knowledge of general industry GP margins.
  8. Marketing and sale skills.
  9. Negotiation techniques.
  10. Legal and financial areas generally.
  11. Brokers Must Act Fair.

The business broker acts for the seller of the business, but he/she also acts for the purchaser, ensuring they receive the relevant information to help them make a decision. The broker must act fairly in every situation. Because brokers are independent they can stand aside from the emotions that are sometimes involved in buying and selling, and they can move the transaction to a satisfactory conclusion for both parties.

Many Benefits from Brokers
Business brokers are preferred because they maintain confidentiality. Also, they usually have a database of screened, potential buyers. These qualified prospects, with the necessary funds available for purchasing, can be presented to the seller of the business.

Business brokers are therefore good representatives to have for advice when you are buying or selling a business. If you are buying a business they can provide you with a list of businesses for sale from their contacts, as well as from their database of businesses listed with their firm.

They are able to find information on a particular business (should you require it), and with the consent of the owner they can show you around the facilities and the operation of a business you may be interested in. Most business brokers act for the seller of the business, but there are cases where a business broker is engaged by a potential buyer to look for a business.