Are you looking to buy a business? Or maybe sell one? Before you go very far in the sales or purchase process, you’ll need to decide whether you’re going to handle everything yourself or use the services of business brokers. How can you best make that decision and what factors should you consider? Lets look at some of the pros and cons of business brokers.
Business brokers are third parties that handle the details when you buy or sell a business. They aren’t the business owner who is selling, nor are they the buyer who will soon own a new business. They are essentially like real estate agents, professionals who bring buyers and sellers together, facilitate the negotiation, and handle the transaction once the deal is made.
The Pros of Business Brokers
There are several good reasons to use business brokers instead of handling the business sale yourself. One of the best reasons is time savings. Selling a business can take a particularly large amount of time. There are many documents that are required before the sale can take place. You can either take the time to put this documentation together on your own, or you can let a business broker assemble these documents for you. If anything, documentation requirements increase during the sale process.
Business brokers can also save time by qualifying prospects. Advertisements that let everyone know your business is for sale may attract potential buyers who actually don’t have the potential to buy at all. Business brokers are experienced at weeding out the “tire kickers” and bringing only the serious buyers to the negotiating table.
In fact, if business brokers are doing their jobs well, they should be maintaining lists of prospects who are ready to buy. If you choose to sell your business through a broker, advertising the sale might not even be necessary. If you’re interested in buying a business, you may be able to find the sort of business you’re looking for more quickly by working with business brokers.
Another good reason to use business brokers is being able to profit from their experience. If you’re buying a business, you may have already bought several and have all the experience you need. However, selling your business typically occurs less often, so you don’t have as many chances to learn how. Because brokers buy and sell businesses all the time, they have accumulated quite a bit of experience.
Business brokers are often used when buyers or sellers want to maintain confidentiality. In some arenas, all the players are so well known that the market itself could be changed by knowledge of a pending sale or purchase.
The Cons of Business Brokers
Maybe a better way to word that would have been the “downsides” of using business brokers. There’s really no reason to expect that business brokers are likely to con you, but there are a couple of reasons why you might want to consider selling or buying a business on your own.
First of all, remember that business brokers charge commissions. There is a lot of work involved in these types of transactions, and if a broker is going to handle everything, he’s going to want some compensation out of the deal. Someone, either the business seller or buyer, will be charged by the business broker.
There’s no guarantee that business brokers will have your best interests in mind. Again, like a real estate agent, the broker will either be working on behalf of the buyer or the seller. The information that he provides about the business will probably be truthful, but might be “spun” to make a business more attractive to increase the chances of a successful deal.
If you’re buying or selling in a specialized industry, business brokers might not have the specific industry knowledge that’s required. In these cases, you’re probably better off working on your own if you have insider information that’s difficult for those outside the business to comprehend.
Finally, a broker might not have your passion for the business or the strong desire to see the deal completed. You should keep in mind, though, that passion and emotion generally don’t belong in the sale or purchase of a business. The emotional detachment of a business broker might be exactly what you need.