The Facts About Business Brokers

A business broker is a person or a brokerage firm that liaises between buyers and sellers of private businesses. They are also known as intermediaries or business transfer agents. The business broker also becomes known as the agent of the principal, which refers to the real buyers and sellers. The main task of a business broker is to assist the buyers and sellers in the sale of businesses, and this task branches out into many other responsibilities.

A business broker is tasked to determine the value of the business that is to be bought or sold. They have the necessary knowledge and expertise to come up with the MPSP Valuation, or the Most Probable Selling Price Valuation of a business. Aside from that, they can also come up with the Comparative Market Analysis because they have an authority in the market. Aside from appraising the business, it is also the broker’s responsibility to facilitate the sale or purchase of a business, from beginning to end. This involves taking care of advertisements and notices, handling the necessary paperwork, facilitating the interviews and discussions, and negotiating for the right price. They are also the ones who fill out the offer to purchase form. However, the responsibilities and authority of the business broker over the sale of purchase ends there. A business broker cannot sign documents, which is an act that can only be done by the principal.

Buyers and sellers are not required to employ the services of business brokers. However, a lot of buyers and sellers choose to use a business broker because they are very helpful in that they relieve the buyers and sellers of much of the stress in buying or selling a business. Aside from that, buyers and sellers also choose to employ business brokers because they are most likely well-connected to other buyers and sellers. This means that the broker himself is like a walking and talking advertisement of the principal buyer or seller. Also, as mentioned above, the business broker has the professional exposure to the market and is especially helpful for buyers or sellers who have no idea whatsoever as to the value of their business. Business brokers also undergo formal training in appraisals. Moreover, their constant exposure to the market makes them experts in the field conditions. Buyers and sellers who employ business brokers will save a lot of time that can otherwise be wasted on wondering what to do next. Business brokers also help save time because they can already provide the necessary forms for the transaction. For sellers, they can also be tasked to pre-screen buyers to find the more qualified ones, a headache that most buyers and sellers will do better to avoid. Determining whether a buyer is qualified or not is very important in facilitating a successful transaction in the shortest time possible. Yet another headache that the buyers and sellers can avoid, thanks to business brokers, are negotiations. Business brokers are used to negotiations and can negotiate more effectively for the right price.

There are three types of relationships that can occur between buyers or sellers and business brokers. The conventional buyer/seller-broker relationship is a full-service brokerage relationship wherein the broker will get a commission from the transaction. Such relationships are legalized under listing agreements and surrounded by fiduciary obligations. There are also some specifications as to the nature and extent of the relationship. This kind of relationship can also come in two forms. One is an individual broker working for a buyer or seller, and the second is a business broker working in behalf of a brokerage company. Aside from the conventional relationship between brokers and principals, there is also what is called transactions brokers. These are brokers that do not represent the buyer or the seller in a transaction. They are a third-party agent who simply facilitates and assists in the transaction. The third kind of principal-broker relationship is called dual agency. A dual agent is a single business broker who represents both parties – the buyer and the seller – in a single transaction. In such cases, there are special laws, especially concerning negotiations of price. A dual agency can also refer to a situation wherein both the buyer and the seller are represented by the same brokerage firm, but are handled by different business brokers belonging to the firm. In such cases, the business brokers are called “intra-company agents”.

Business brokers are paid through commissions. The standard commission rates differ from one state law to another. The commission agreement is stated in the listing agreement that the broker or brokerage firm and the buyer or seller agrees upon before anything else. The amount of the commissions is also negotiable. Buyers and sellers should also be careful in choosing business brokers to deal with. Some states require broker licenses, and some may not. In states where licenses are required, buyers and sellers should only deal with certified licensed brokers. There are business brokers associations that can help a buyer or a seller choose a broker to employ. These associations bring together buyers, sellers, and business brokers.