Business brokers, also called business transfer agents assist buyers and sellers of privately held small business in the buying and selling process. They typically estimate the value of the business; advertise it for sale with or without disclosing its identity; handle the initial potential buyer interviews, discussions, and negotiations with prospective buyers; facilitate the progress of the due diligence investigation and generally assist with the business sale.
Agency relationships in business ownership transactions involve the representation by a business broker (on behalf of a brokerage company) of the selling principal, whether that person is a buyer or a seller. The principal broker (and his/her agents) then become the agent/s of the principal, who is the broker’s client. The other party in the transaction, who does not have an agency relationship with the broker, is the broker’s customer.
Types of services that a broker can provide
Broker services vary widely depending on the practice and skill set of the broker. The most common services provided by a broker to a client are:
- Assist client in establishing a MPSP Value – Most Probable Selling Price Valuation; the techniques used by individual brokers can vary greatly in this process
- Develop a comprehensive Information Memorandum on the company; normally a 15-30 page document outlining the business for potential buyers
- Conduct buyer searches
- Exposure – Marketing the business to prospective buyers
- Screen buyers for ability to complete a purchase
- Coordinate negotiations and provide deal structuring advice
- Provide overall deal management to guide the client through the entire process
- Help maintain confidentiality of the sale
- Hourly Consulting for a fee, based on the client’s needs
Perhaps one of the biggest services provided by brokers is the ability to allow owners to stay focused on running their business during the sale process which can be take on average 6 months to 12 months to complete.
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There are some consulting companies which work with buyer and seller to find the best business to sell/buy and work as a agent for one side and a broker for the other side.