What you think of when you think of a business broker? Most of you will say that you use a business broker for selling a business. And you would be right. That is the problem. Quite often you get a transaction where the seller of the business is represented by a business broker and the buyer has no representation other than a solicitor and an accountant. That could mean that the seller has a skilled and trained negotiator and that the buyer does not. A buyer’s solicitor will handle the legal terms and the accountant will normally be hired to investigate the business, conduct due diligence if necessary and determine if the buyer has the financial ability to complete the transaction and successfully run the business for the first 12 months. Neither of these professionals should be asked to act as negotiator as it may distract them from their specialised role. Let’s look at how a business broker could assist a buyer in buying a business. A business broker can:
- determine what price should be paid by proper valuation of the business
- conduct an investigation of the surrounding circumstances of the sale including seller motivation and the strength of competitive businesses in the space or location
- uncover strengths weaknesses opportunities and threats of the business
- watch for vendor manoeuvres and plays, having been involved in so many transactions on the other side.
All the above will assist the buyer in coming to a proper decision on whether to buy or not. Further, the broker can act as a middleman in the negotiation. This provides further assistance in that:
- it will even up the playing field when the seller of the business is represented by broker
- the buyer can remain an arm’s-length and that will ensure a smooth transaction and greater co-operation after sale, an important but much neglected feature of any business sale transaction
- the broker can ensure that fair terms of agreement are arrived at prior to going to legal contract, potentially saving thousands of dollars
Many people fail in business because they don’t gather enough information before they’re buying a business. I always say that the seller of a business knows more about the business than a buyer. By having a professional representative, a buyer takes a great step towards making the game fairer and ensuring that he or she does not go into the transaction at a disadvantage. If you would like us to represent you as a buyer contact us so we can help you.
Tony Arena
Owner @ BCI Business Brokers, 30 years of experience in selling businesses
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