Business Brokers guide (Business Agent)

Posted on 09 Jan 2023, by admin

Business Brokers guide (Business Agent)

What Is a Business Broker?

Business brokers or “business sales agents” are organisations who usually act to find a buyer for an owner in buying a business and selling businesses.

What are the types of business brokers?

There are several different types of business brokers, including:

  • Multi-service brokers: These brokers offer several, but not a complete range of services, including helping with valuations, marketing the business for sale, and assisting with the negotiation and closing of the sale. They don’t offer legal services and rarely have a hands on preparation to increase value.
  • Limited-service brokers: These brokers typically offer a more limited range of services, such as marketing the business for sale and assisting with the negotiation process.
  • Online brokers: These brokers use the internet and other digital tools to help facilitate the sale of a business. They may offer a range of services, including marketing and negotiation assistance. Often however they are only listing a business on a website.

Business brokers can be beneficial to business owners because they have the expertise and resources to help sell a business quickly and efficiently. They can also help business owners get the best price for their business.

At Dexterity Partners we provide a full-service, end to end which involves legal services which as well as providing the completion of the Sales and Purchase Agreement (SPA) at the end of the process. Usually the SPA would be prepared by lawyers separate from the brokers and it would be on the business owners to appoint a legal firm to carry this out. By combining all in one at Dexterity Partners we not only provide a truly end to end service, but also one that delivers greater service and is more cost efficient as well as convenience by including the legal team from day one. It means a Seller has one point of contract for all issues.

What Is The Role Of The Business Broker In A Business Sale?

The role of a business broker in the sale of a business is to facilitate the transaction process and help bring buyers and sellers together. They may be involved in a variety of tasks, including:

  • Valuing the business: Business brokers can help business owners determine the fair market value of their business.
  • Marketing the business: Business brokers can help market the business for sale to a wide audience of potential buyers.
  • Negotiating the sale: Business brokers can assist with the negotiation process to help ensure that the sale is completed smoothly and successfully.
  • Closing the sale: Business brokers can help facilitate the closing process and ensure that all necessary documents and paperwork are completed accurately and efficiently.

What are the responsibilities of a business broker?

The responsibilities of a business broker in the sale of a business include:

  • Maintaining confidentiality: Business brokers are expected to maintain the confidentiality of the business and its financial information.
  • Representing the interests of the seller: Business brokers are expected to act in the best interests of the seller and help ensure that they receive the best price for their business.
  • Facilitating the transaction process: Business brokers are responsible for facilitating the sale process, including marketing the business, negotiating the sale, and closing the deal.

Potential disadvantages of using a Business Broker

However, there can also be some potential disadvantages to using a business broker. For example, they typically charge a commission, which can be a significant percentage of the sale price. In addition, some business owners may prefer to handle the sale of their business on their own.

However in the vast majority of transactions brokers are used, if a buyer has already been found then whilst the more limited brokers are not used, the other services are still usually employed such assisting with the negotiation, managing the due diligence process and completing the sale. Where Dexterity Partners offers value in these circumstances it can often increase the initial offer by 20-30% and improve the probability of the deal completing.

Often these services however are employed from other professional firms also and not the brokers themselves, either as the broker does not provide that service or for preference reasons. Regardless, what we find is that these additional services are often vital in ensuring the transactions both go smoothly and even complete at all.

Do business brokers charge upfront fees?

Business brokers typically charge their fees as a percentage of the sale price of the business. This percentage can vary, but it is usually between 5% and 15%. In addition to the commission, business brokers may also charge additional fees for services such as valuations, marketing, and legal assistance. However in most cases the commission is the largest part of the fee. At Dexterity Partners we work with a range of fee structures to suit the client. We want something that works for everyone and suits your needs of the individual seller and so give options on fee structure.

When working with a business broker, it’s important to carefully review their services and fees and to understand the terms of their agreement. It’s also a good idea to do your own research and seek the advice of your lawyers or accountants before making any decisions.

In addition to considering the services and fees of a business broker, it’s also important to consider the broker’s reputation and experience. Look for brokers who have a track record of successful sales and who are well-respected in the industry.

For further information and impartial advice, feel free to contact our founders at Dexterity Partners.