Business Broker - Why Is It Important To Have The Right One?

By Author: Chris Jonse
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Definition of a business broker

A Business broker is an individual or a firm that acts as an intermediary to facilitate buying and selling of businesses. Some business brokers may also provide other complimentary services like business valuation, succession planning, exit planning and merger and acquisition services.

Why hire a business broker?

In order to buy or sell a business, it is important to know the accurate market value of the business. According to Wikipedia the market value of a business is the price at which an asset would trade in a competitive Cardinal auction setting. Having an experienced business broker is important to making a sound financial decision. One of the primary services provided by business brokers is business valuation. Business valuation is the process of assessing the financial worth of a company. Not knowing the true market value of a business may lead to a potential loss on the sale or acquisition of a new enterprise.

Buying and selling of a business is a complex process that has lot of financial and legal implications. The intricacy of the process involved makes ...
... it necessary to have the right type of counselling. An experienced business broker can help in easing the complexities of buying and selling of business and make it a smooth process.

How a can a business broker help?

Buying and selling of a business requires a specialized set of skills. An experienced business broker can help in the following ways:

Identifying the right buyer or seller for a business.
Help evaluate the best option for business transition.
Work with the seller to create an exit planning or succession planning strategy.
Business evaluation to assess an accurate market value of the business.
Negotiate terms on behalf of the buyer and seller.
Identify and resolve any pre or post sale issues for the management and the employees.
Ensure all regulatory and legal issues are addressed during the transaction.
Coordinate efforts between lawyers, bankers, insurance agents and other stakeholders involved.
Ensure that the transaction is legal and the transition to the new ownership is smooth and seamless.

Choosing the right business broker?

Here are some helpful tips, if you are considering hiring the services of a business broker:

Experience: The number of years in business, the volume and type of business transactions executed is generally a good indicator for a good business broker. Do your homework, check their background and evaluate the businesses they have transacted and the industry they focus on.

Service offerings: Buying and selling of a business requires extensive due diligence that may involve various aspects of business planning, including option considerations like buy verses sell or merge. It may start with planning of exit strategies, market valuation of the business, strategies for financing the sale and the transition of the business to a new ownership. A business broker who is experienced in all these areas might bring a better value than a broker who only focuses on certain aspects of the brokerage business.

Industry Specialization: Business brokers that specialize in certain industry might be a good resource for businesses that focus in similar industries. Due to their industry specific expertise these broker might have insight that other more industry diversified brokers might not be able to bring to the table.

Certification: A certification from an industry recognized organization like International Business Brokers Association (IBBA) or a BBB (Better Business Bureau) is always helpful. It adds credence and recognition to the individual or the firm.

References: A good ways to find a broker is through local referrals. People who might have used a business broker are a good source, especially in terms of their experience in working with them. A friend or peer in the industry who might have used the services of a business broker is always a reliable source.

Conclusion

A business brokers can bring lot of value to the process of buying and selling of a business. Due to the complex nature of the transaction it requires expert knowledge. There are lot of financial, legal and transitional issue that needs to be addressed, that an experience business broker can help to mitigate. One however needs to do their home work, before they engage the services of a business broker, to make sure they get the best value for their business decision.