Scope and Functions of a Business Broker



It is the function and job responsibility of a business broker to act as a buffer, one who can provide a safeguard, between the buyer and the seller, such that a business broker can negotiate something to the buyer and discuss this negotiation to a seller and end up with something productive. For instance, the broker can advise the owner-seller in terms of an appropriate price on something, which the owner-seller is about to sell out, and strike a better strategic deal, which will benefit both the owner-seller, as well as the business broker. On the part of the buyer, if you plan to buy an existing business, a broker can help find you one that can suit your specific parameters, like location, kind of business and size, in which a broker can charge for a commission of 5 to 10% of the purchase price. Some buyers would rather hire a broker at a point when the final negotiation is reaching its final phase, to save money. 

There are many ways where business brokers are able to assist buyers: pre-screening businesses, which is helpful for prospective business advisors because the right business brokers won't recommend any kind of business if the owners do not provide full financial disclosure of their company or if the offer of the owner is overpriced; helping the buyer with respect to the buyer's interests, which means that a good broker tries first to learn about the buyer's skills and interests, so he/she can select an appropriate business for the buyer; negotiating on behalf of the buyer and seller, which is where the broker is acting as a buffer between the parties concerned and staying focused on the objective of each party; and assisting with the paperwork, which is where the broker has to provide the assistance as he/she knows better the latest laws and regulations that require licenses and permits to finance and escrow and, with this form of assistance, this will reduce the risk on red tapes which can hamper the purchase process.

Finding the right business brokers who is able to do the following: one who can read the market, knows who is buying what property and who has got the resources, and can eliminate the tire-kickers from the genuine buyers; one who can be trusted to ensure that the news of the sale remains confidential, so that loyal customers, employees, vendors and suppliers will later find out once the buyer is prepared to announce the whole turn over; and one who knows the paperwork and has good relations with lawyers, CPAs, bankers, insurance agents, etc. Finding one who has the mentioned qualities may be expensive, but the owner-seller will have to understand that in exchange for the value of hiring a good business broker, the owner-seller is able to achieve the following: gets investment protection from the broker in terms of placing the right value of the business or finding the right buyer or getting the right price possible; gets the confidentiality of the sale; receives a stress-free handling of all negotiations, such that the transactions are legal; and seeing the transfer to a new ownership as smooth as possible. The money spent by the owner-seller to pay for the business broker's fees are worth all these benefits that the seller receives.