Have you ever asked yourself, “What does a business broker do?” Though you’ve probably heard the term before, you might be unclear about what business broking involves.
Have you ever seen a sign advertising a business for sale? Most business owners and buyers don’t handle the sales transaction themselves. Instead, they turn to a business sale broker who mediates and negotiates the terms of the sale.
In this post, we will take a closer look at a business brokerage, explaining what a business broker is, what they do, and why they are essential.
What Are Business Brokers?
Business brokers are intermediaries who assist clients in selling or buying businesses. They have specialized expertise and are knowledgeable about aspects involving the sale and acquisition of a business.
A business broker is a lot like a real estate agent but with more responsibilities.
What Do Business Brokers Do?
Yes, they are a crucial part of the sale and buying process, but what does a business broker do? Many think a business broker simply brings the buyer and seller together; however, their role is far more complex.
For starters, they ask the right questions, determining their client’s needs and how best to fulfill them.
Brokers also take their clients through every step of the transaction, ensuring they streamline the process. From evaluating the business to performing due diligence and closing the deal, the broker’s goal is to take the burden off the buyer and seller.
A business broker is responsible for the following:
- Helping determine the business’ price
- Developing the business’ blind profile
- Performing buyer outreach
- Screening buyer inquiries
- Preparing and delivering Confidential Information Memorandums
- Assisting in evaluating buyer proposals
- Managing the buyer/seller meetings
- Structuring the details of the transaction
- Overseeing the due diligence process
How Do Business Brokers Work?
With business brokers having to wear many hats, how are they able to complete their work and ease the process?
While each broker will have their unique process, here’s how brokers usually work.
Valuate the Business
Typically, a business owner looking to sell their enterprise will reach out to a business broker. Afterward, the broker will analyze the business, determining its sale price.
Since they are familiar with market trends, they can set realistic pricing based on the business’s current position and potential for future growth.
Search for Buyers
Most brokers who sell businesses tend to have a catalog of able and willing prospective buyers. This catalog will have several potential clients the broker previously vetted to eliminate unqualified buyers and save time.
Once a broker evaluates the company, they will turn to this list and notify the buyers they feel would be interested. Sometimes, the broker might market the business to a wider audience, doing so with the utmost integrity and confidentiality.
Screen Potential Buyers
Potential buyers will show their interest by submitting proposals. The broker screens these proposals to find the right fit and match the seller with the perfect buyer.
They will then present to the seller the proposals that meet or surpass a predefined threshold. The seller will review the proposals, picking options that show the most promise.
Set Up the Buyer/Seller Meeting
The broker then sets up a meeting between the seller and promising buyers and will act as an intermediary. These meetings often lead to negotiations, with the seller granting buyers access to their company’s financials.
Handle the Paperwork
Handling paperwork is perhaps the biggest job business brokers have. They are responsible for the sale’s minute details, facilitating the agreements, documentation, licensing, permits, and financing.
Close the Deal
Once the broker ensures everything is to the seller’s and buyer’s liking, they will proceed to close the deal.
Benefits of Using Business Brokers
Besides “What is a business broker?” and “What does a business broker do?” another common question we often come across is, “Do I need a broker when selling or buying a business?”
Selling and buying a business is a long, complex process. Depending on the business, the sale can take anywhere from 6 to 12 months or even longer. Considering everything sellers and buyers have to deal with, such transactions can easily be overwhelming.
Fortunately, hiring a business broker can help you enjoy the following benefits:
Easily Find Buyers
A qualified, experienced broker knows how to identify potential buyers with the willingness and financial resources needed to purchase the business.
Working with such a broker will enable you to find buyers easily and quickly.
Lets You Focus on Running Your Business
Various businesses heavily rely on their owners for critical functions, like administrative tasks or high-level strategy.
If your business is similar, diverting your focus and energy to its sale could be detrimental. On top of creating additional frustrations, doing so could harm your bottom line and reduce your company’s selling price.
Streamlines the Sale
Working with a broker with plenty of experience in the broking business is vital. They can guide you through the entire process, giving you accurate expectations.
Their experience, expertise, and relationships with other professionals like accountants and transaction attorneys go a long way in streamlining the process.
Most importantly, they know how to identify your business’s strengths and weaknesses and can help you present your company in the best possible light. By doing so, they can help you get the best price and terms.
Tips for Hiring a Business Broker
The key to enjoying these benefits and more is picking the right broker. While this can be challenging, knowing the questions to ask and what to look for will help.
When hiring a broker:
- Interview multiple options: Meet brokers face-to-face and inquire about their certifications, areas of expertise, experience, rate, and connection with other industry professionals.
- Review their credentials: Evaluate their answers and credentials, picking the option you find most favorable.
- Ask for references: A quality broker will have past customers willing to provide testimonials.
Qualified Business Brokers in Sacramento, CA
Selling or buying a business can be a confusing and often stressful process. Fortunately, hiring the services of a qualified, experienced business broker can help.
What does a business broker do? They utilize their expertise, experience, and connections to ease the entire process.
Are you searching for a qualified broker in Sacramento, CA? Reach out to Sacramento Business Broker. From providing business valuations to setting up meetings with potential buyers, we work with you to make the sale of your business happen as smoothly and quickly as possible.
If you are looking to buy a business, we can help with that too. Contact Sacramento Business Broker at (916) 975-8388 for qualified brokers you can trust.