A business broker acts as a middleman, for either a buyer or seller. Business brokers perform many functions depending on the needs of the specific buyer and seller. Certain brokers only act on behalf of buyers and vice-versa, some act only on behalf of sellers.
In my opinion. the best business brokers have a deep understanding of finance and accounting. They have either held positions as CEO’s or CFO’s or have spent many years counseling and advising business owners. They are well versed in understanding financial statements, budgeting, strategic planning, negotiations with customers and vendors, and have robust experience in business operations. In short, they have a lot of experience to draw on.
When a seller engages a business broker to help sell the business, you are signing up for a six-eight-month relationship, the average time it takes to sell a business. So, it makes sense that you perform a certain amount of due diligence on the person that will be representing you in what could be the largest transaction in your life! You want to have a certain comfort level that your broker will be responsive to your needs, diligent in searching for the right buyer, pricing the business correctly, and making sure the transaction follows a smooth path. I can’t stress this enough, both the buyer and the broker need to be committed to the process.
I try to set the right expectation for sellers that I represent. For example, the majority of deals will require some portion of seller financing. The exact amount will depend on each deal but riskier deals generally require more seller financing. The buyer due diligence process can be very stressful for the seller. There is a large amount of data requested by the buyer and some of it doesn’t seem to be necessary. The lender may also request additional data. That’s where a good broker helps to bridge the demands of the buyer and lender with the seller’s reluctance. Upfront planning for due diligence will lessen the burden on the seller.
Often the finish line seems to be a constantly moving target. A good broker is focused, can anticipate problems, offers creative solutions, and brings both parties to the finish line! All in a days work. That’s a business broker, in a nutshell.
