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5 Things to note while dealing with Business Brokers

Entrepreneurs must know these major points while dealing with a broker. As business Brokers are a way for Businesses/Start-ups success road.
BY Akshay Arora
Feature Writer, BusinessEx
Jul 05,2017

A professional who performs as an intermediary between buyer and seller to crack a deal with a business sale between parties is a business broker. Business brokers must have a good networking scale and have a good reputation in their profession in order to gain entrepreneurs interest to sell their business or to find a right opportunity to invest in.

Business Broker sure does charges commission which is generally 5-10% of the sale. For new entrepreneurs, brokers are the most helpful in the purchase or invest in the business because they have networks and good at negotiating which leads to cut a good deal. However, to save cost it is better to hire a broker at negotiation stage of a transaction; the broker will charge you less.

While dealing with business brokers, it is necessary to keep these following in mind:-

Track Record and Goodwill

It is necessary to know the track record and brokers performance in order to decide whether the transfer of ownership of business is in good hands. Brokers records can be checked by confronting them with questions like how many businesses of same nature and of same range value did you sell last year?. Their track records can also be checked if they have the presence of internet through a website. A well-reputed broker will always showcase his capability, knowledge and share their past experience that will help attract customers.

Benefits and Services

Before finalising a broker to sell your business it is necessary to ask what services they provide and at what cost. Services depend on the qualifications and skill set of the broker but these are the common services that generally all brokers provide:-

  • Most Probable Selling Price Valuation (MPSP) is done for business by the broker but it may vary from each broker to broker as they may use different approaches.
  • Take care of developing a Buying and Selling agreement which is an evident proof of sale as per law.
  • Act as an intermediary to complete sale and purchase of a business.
  • Market business to attract prospective buyers.
  • Pre-Screening of buyers is done by the broker to select the most suitable buyer for the seller.
  • Coordinate negotiations and provide deal structuring advice.
  • Provide overall deal management to guide the client through the entire process.
  • Help maintain the confidentiality of the sale.

Mapping of Business

Brokers help in the mapping of business in which defines what a business entity do, who is responsible for the functioning of business and also determine the most probable selling price for the business so that right buyers or investors are attracted towards purchase or investment of business. So its necessary to ensure before whether broker does the business mapping. Also, it is necessary to know how broker determines the business value, so that seller doesnt have to bear any loss during the sale transaction.

Fees Structure and Negotiation Skills

It is necessary to know the fees structure of broker so that there will be no effect on estimated profit by the seller. Most brokers charge a success fee, which is a commission based on a portion of the price paid at closing of the sale of your business. Usually, the commission is 10 percent, but it is necessary to ask before if any other fees involved except commission or not.

The broker must have negotiation skills so that for seller he could get the best amount of business. No broker can be successful in business brokerage if he doesnt possess negotiation skills.

Networking and Honesty

Good networks a broker has the better deals he will bring, so it is essential to select a business broker related to the industry and have past experience in the brokerage of this industry. Qualifications do matter but, a broker presence in market and experience matters more.

A broker must be truthful to the seller and report if any deal comes up, as many generalists brokers are present in the market so a seller and buyer need to be beware of them. It is better to go with reputed and trusted broker. Businessex.com is a platform which made it possible for buyers, sellers of business to interact and conduct their transaction with full confidentiality. Businessex.com made it a lot easier for the buyer to purchase a business or seller to sell a business.

Conclusion

While selling your business, you dont want just a buyer instead you want the best buyer offering the price as you estimated. This is possible only if you hire a broker, he will find the best buyer and negotiate the best deal for your business. Brokers make sure that you have what you demand and are very useful for new entrepreneurs.

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