What is a Business Broker
What is a Business Broker? A business broker is a person or firm who acts as an intermediary between buyers and sellers of a small business.
A business broker provides professional services for both the buyer and seller of a small business including estimating the value of the business, advertising the business for sale by maintaining confidentiality, interviewing and qualifying potential buyers, introducing interested and qualified buyers with the seller, writing up and explaining an offer to purchase, negotiating the purchase price between the buyer and the seller, assist the buyer in financing methods, collect and review due diligence items with the buyer, and assist with an attorney on closing documents.
How many Business Brokers are in the US? There is approximately 3,000 Business Brokers located in the US. About half work as sole intermediary's and the other half are part of a franchise or multiple office network. Sunbelt Business Brokers is the largest business brokerage company in the world with over 300 offices worldwide.
Why use a Business Broker? A business broker can provide both the buyer and seller specific knowledge and experience in the sale of a business. In many cases using a broker can make or break a deal. Business Brokers will often show buyers opportunities they may never have considered and can help educate buyers on the importance in finding the right type of business for their lifestyle.
When selling a business, a broker will most-likely bring more qualified buyers than a seller can achieve on their own. In addition, they will provide an important screening tool for the seller by pre-qualifying buyers upfront and determining the best options for the buyers financing. Brokers can also help the seller understand and determine the best price to ask or accept for their business.
Business Broker Fees and Compensation? Business Brokers are paid by the hour, retainer, or a success fee (commission paid at closing). The most commonly used is a success fee commission structure where the broker is paid by successfully selling the business. Retainer fees are becoming more popular to help recover upfront costs associated with marketing the business and it also shows a commitment from the seller that they are serious in selling their business.
Success fee commissions range from 8% - 12% of the total purchase price. Typically for smaller transactions there will be a minimum commission fee of $10,000 - $20,000.
Licensing of Business Brokers: In the US, licensing of business brokers varies by state. A real estate license is required by 13 states including Arkansas, California, Colorado, Florida, Georgia, Idaho, Illinois, Michigan, Minnesota, Nebraska, Nevada, Oregon, South Dakota, Utah, Wisconsin, and Wyoming.
Business Broker Trade Associations:
Alliance of Merger & Acquisition Advisors: (AMAA Online)
American Business Brokers Association (American Business Brokers)
Association of Professional Merger & Acquisition Advisors (APMAA)
International Business Broker Association (IBBA)