What does a business broker do is a common question posed by those new to the world of business sales.
Whether you have been thinking about selling your business or talking with one about purchasing, this article covers what a business broker does and how they can assist the vendor and the buyer when selling or purchasing a business asset.
Whilst there aren’t any formal qualifications necessary for a business broker, not having some fundamental skills usually results in difficulty for the business broker when talking with clients.
Some such baseline skills include an advanced understanding of financial information and reading financial statements; strategic analysis is imperative so the broker can anticipate what buyer or group would benefit from purchasing a particular business.
In addition, understanding the nuances of specific industries and their operations plus basic conveyancing and contract knowledge.
However, often the most significant asset a broker can bring is people and project management skills.
Using this bank of knowledge that the broker has acquired over many years, they can apply it to their work.
To start with, usually, the broker represents the business owner, in the same way a real estate agent represents the owner of a house or property. Then, after meeting with their clients, the broker will advise on what offers they can expect from their business.
If the buyer is happy with those expectations, the broker will prepare the business for market. This preparation includes getting all the information that a buyer will want to see in order, including financial, lease, reporting data, an information memorandum and anything unique to the sale.
Next, the broker or their team would prepare ad copy, and the business would go to market on one or more listing sites.
As enquiries are made, buyers will be directed to complete a non-disclosure statement before receiving any information.
Different buyers will have differing ideas in mind for what they are looking for; hence the broker’s people skills are essential to help the buyer see the opportunities of this business for their future.
Soon enough, offers will be made and how the broker presents these offers is essential. Some might simply forward emails or jump on a call.
A good broker will have the offer in writing and then drive (if feasible) to the owner and discuss the offer with them.
If the offer is agreed upon and signed by both parties, the broker will then manage the contract and liaise with the legal team of each party.
The contract stage is the part where most deals collapse.
The biggest deal killer is L.A.G. or lawyers, accountants and greed.
Too often, I’ve had to jump back in at this stage because the deal is stalling or, worse, collapsing and help the buyer and seller agree on particular items or clauses in the contract.
Usually, there’s a simple and clear path forward, but the clause just got bogged down in legal. Once the contract is signed, there should now be a clear pathway to settlement.
The contract will outline what conditions must be met and each condition’s time limits.
The broker should still manage this process and ensure everything is on track, being available to assist the buyer and seller should any problems arise and help them through it.
I’ve heard from both buyers and sellers that the last time they sold a business, the broker disappeared after the contract was signed. Make sure this doesn’t happen to you.
This article is a brief but general overview of what most business brokers do.
However, there are many services a good business broker can do, including exit planning, acting as buyers’ agents or conducting valuations, sale reports and appraisals for owners for internal purposes or those who want to know where their business sits in the market.
If you are thinking about selling but don’t know where to start, get in touch with the details below.
I’ll be happy to help you become clear on your next step to exit your business successfully.