This article are provided for information purposes only, and are not intended as legal advice.


What is the value of a business broker when you buy or sell a business?

October 20th, 2009

When it is time to retire and sell your business, you have two choices, sell the business by yourself or use a business broker.  There are many pros and cons of using a business broker but in the end, the advantages as you will see far exceed the disadvantages:

 

Advantages of using a business broker

  • if you have never sold a business before, they can be your teacher and explain all the steps and procedures of selling your business
  • if the investor has never bought a business before, the broker will be the educator and explain to them what to look for and why the business they represent may be a good investment for them
  • the business broker has experience in valuing your business therefore the price that is determined hopefully should be close to the final selling price.  If you list the business yourself, you may be over priced.  As a result, fewer people will look at your business for sale
  • the business broker is well connected and has many buyers and sellers looking for businesses all the time.  As  a result, the sale of your business may be faster than if you tried to sell the business yourself
  • the business broker knows how to package your business and presents only the information that investors tend to look for
  • the business broker can sell your business without your competitors knowing who is for sale.  If the seller of the business advertises the phone number of the business for sale, your competitors can figure out that you are for sale and they may try to use that information to get some of your customers

 

Disadvantages of using a business broker

  • more expensive then selling yourself, you will have to pay a commission on the sale of your business.  Hopefully the business broker is worth their weight in gold and the higher price that they are able to get for your business will more than make up the  commission that you will have to pay
  • you do not know who the broker has approached to sell your business, you lose some of the control of selling your business.  Hopefully you have guided the broker to the people who should not be contacted ie competitors if you do not want to sell to a competitor

 

The two disadvantages of using a broker can be overcome as indicated above.  If you want to sell your business by yourself, you can list your business for sale on The Business Place.  If you are looking for a business broker, please look under the business broker directory for the broker closest to you.


Filed under: Business brokers — Gary Landa @ 8:48 am


1 Comment »


  1. Gary – thanks for the nice summary of the advantages and disadvantages of using a business intermediary/business broker. I just wanted to add on a couple of things which I think are extremely important as far as the role of a mediator is concerned. Both of them are based on my experience as a business broker in Toronto, Ontario, however, I am sure they are applicable across the board. First – broker’s role is paramount in negotiating the terms of the deal and explaining to both parties what are they really getting and what they need to give up. By being this person in the middle we eliminate potential animosity and haggling between the parties and make sure that they continue to hold each other in high regard. Secondly – it is the ability of the broker to navigate the due diligence process which is an enormous help for moving a deal to the finish line. In our experience, it is close to 75% of deals’ failure rate that are due to mismanagement of the due diligence process. Again – great job and keep up the great work on the blog.

    Comment by Alex Shteriev — October 24, 2009 @ 4:13 pm


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