Using Business Brokers to Help Buy a Business

Last Updated: August 22, 2009

2c) Business Transfer Brokers

Business transfer brokers are highly recommended to help you buy a business. If you choose to use one, make sure that they are the best you can find (ask lawyers, accountants, and business associates to suggest quality firms). By not doing so, the potential lack of experience or reputation can easily mislead you. You should contact the brokerage firm and tell them exactly what type of business you are looking for so they can assign the best broker to fit the job.

By using brokers, they will find you a number of potential businesses to match your criteria list (or thereabouts) from their own database. Consequently, it will cut out the time needed to search for a business yourself (although you may want to anyway).

The broker will not put in front of you the ideal business; just those that they feel will gain your interest: finding the right business is down to you.

The broker will answer any questions that you have about the business in general and will follow up on anything that they cannot provide a response to. Further, for those businesses that you show interest in, they will obtain all the necessary financial documentation for the business (trading accounts, VAT returns, books – sales and purchase ledgers) and arrange a meeting with the owner to allow you to view the facilities and operations. They will also negotiate a period for due diligence (explanation later in article). Resist talking to the owner about the price or terms of sale of the business: these will be discussed with you by the broker who will have all the necessary information on the matter, and is probably a much better negotiator than you.

Brokers can also be used as the ‘news breaker’ to the owner of the business. If you have any bad news or concerns about the business, the broker can deliver this. By doing so, it will maintain a good relationship between yourself and the owner which will be needed for negotiating and completing the deal.

The added advantage of the broker is that they work on comm ission and so their service is only p aid for if you finalize a deal. The commission is usually a percentage of the total deal and is paid for by the seller; but, as ever, make your own deals. They may also require a commission for every business they show to you which will be paid for by yourself.

Finally, you are employing the broker, so, if they are not performing to your needs: get a new one. Looking from their angle; let them know if you lose interest in a business at any time, don’t mislead them and respect that they work on commission where their valuable time could be used elsewhere.

2d) Selecting a Business

It is not recommended that you pick just one business: select a hand full, say three or four, but there’ s no harm in prioritizing them. Your next task is arguably the most important: research the business.