What is a Business Broker? And Why You Need to Know
- 10X Business Broker Mergers & Acquisitions
- Feb 9, 2022
- 2 min read
Updated: Feb 15
A business broker is an individual or company that assists in the purchase and sale of small businesses. These agents can take on a variety of tasks to help their clients achieve their goals and offloading objectives, and might specialize in companies belonging to certain industries or possessing specific, unique characteristics.
Understanding a Business Broker
Transferring ownership of a company is a complex process. Among the various challenges that must be overcome include determining a fair valuation, making sure the company's finances and accounting records are in order, negotiating a price, going through escrow, and closing the sale.
Business brokers not only manage these steps but also ensure confidentiality by requiring interested buyers to agree not to disclose the details of the potential business sale. Business brokers, which may work independently or as part of a larger brokerage firm, can also help with licensing and permitting requirements and weed out unqualified suitors.
Picking the Best Business Broker
Choosing a decent business broker requires a bit of effort. Many of them will be good at their job, though, as is the case in any profession, some will be better than others.
A smart place to start is by looking at the percentage of businesses they’ve sold out of all the businesses they’ve tried to sell. After assessing track records, it’s worth picking one with relevant expertise in the same field as the company in question.
Beware, though, that business brokers in some states aren’t regulated. A few states even permit the same broker to represent both the buyer and the seller in a transaction. Dual agents, as they are known, are often required to follow certain rules, yet that, perhaps understandably, does not completely eliminate concerns over potential conflict of interest.
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