If you’re in the market to buy or sell a business, you may have come across the term “business broker” in your research. While business brokers offer valuable services that make it easier for businesses to change hands, their purpose isn’t always well-known to individuals who haven’t participated in this kind of transaction before.
Below, we have answers to some of the most commonly asked questions about business brokers.
What is a business broker, exactly?
The role of a business broker is to act as a mediator between buyers and sellers of businesses. Rather than trying to negotiate the details of a complicated agreement themselves, these two parties can rely on a broker to be their go-between.
The broker increases the likelihood of a productive discussion, leading to a deal both individuals can be satisfied with. This can be a huge time saver in what is often a lengthy process, and can also minimize the stress and uncertainty surrounding the weighty decisions involved in buying and selling a business.
Why do you need a broker?
In addition to the above, brokers offer valuable services for both buyers and sellers. When it comes to purchasing a business, a broker can advise entrepreneurs about finding the right purchase for their budget, personal strengths, and expectations.
Since brokers have so much experience in the local business market, they are well-equipped to recognize when a deal is not in the buyer’s favor, helping the buyer avoid making a decision they would later regret.
For sellers, brokers make it easier to connect with serious buyers and can weed out individuals who express interest but lack the resources or know-how to run a particular type of business. Brokers can also assist with paperwork and administrative tasks that could otherwise be overwhelming for sellers to complete on their own.
How much does a broker cost, and are their services really worth it?
Brokerage fees tend to run between 5 and 10 percent of the selling price of a business. In most cases, especially for first-time buyers, the services of a broker represent money well spent. It helps to think of the broker’s commission as a kind of insurance.
Sellers will gain peace of mind that their business is being properly valued during negotiations, while buyers will have access to objective advice that can help them make decisions with confidence.
It’s important to get a complete understanding of what services your broker will offer and what their fees include as you get started.
What qualities should I look for in a broker?
In order to get the most out of your relationship with a broker, it’s important that you select one who has their pulse on the business market in your local community. This in-depth knowledge will come in handy for connecting buyers with sellers and correctly assessing the value of a business.
In addition, you’ll want to find a broker who you can easily communicate with. Since their role is to negotiate on your behalf, it’s crucial that you feel completely understood when discussing your priorities and goals with them. Likewise, as business negotiations can get complicated, they need to be able to communicate legal and financial details in a way that makes sense to you.
Where can I find a professional broker?
There are several resources you can check to find a broker in your local area. You can start with the “Business Opportunities” section of local and regional papers to see who is facilitating the sales of businesses in your community.
It’s also worth taking the time to ask previous and current business owners about their experience with trustworthy brokers. They’ll be able to give you their honest opinion of how a broker benefitted them during the buying and selling process. If you don’t have any business owners on your contact list, try checking with the local chamber of commerce or asking your CPA or attorney for referrals to brokers in your community.
Are you in search of a reliable business broker to assist you with buying or selling a business? Contact Murphy Business today at (888) 561-3243 to connect with a broker in your area.