Benefits and disadvantages of using business brokers

The process of selling a business can be complex and challenging. Hiring a business broker to handle this process may be the easiest way to get the results you are looking for.

Business brokers are usually responsible for negotiating the sale and purchase of businesses. They act as middlemen in business negotiations by acting on behalf of the buyer and seller. They provide specialised services so they charge a hefty fee for their services. Before you consider acquiring the services of a business broker, consider the benefits and disadvantages:

What are the benefits?

Presentation of the business: Brokers can present the business quite well, so it will sell quickly. They rely on their expertise to make the business attractive to the buying market.

Benefits and disadvantages of business brokersAttracting potential buyers: Good brokers will have an effective screening process. They can also use their databases and client networks to generate more interest. They can also guide the sale by making business listings on relevant databases.

Making accurate business valuations: Business brokers can determine a fair price for both parties. Using their extensive knowledge and expertise, brokers can create an accurate valuation of the business for sale.

Closing the deal: Business brokers can use specific techniques to turn interest into a real sale. By attracting healthy competition among potential buyers, they can make the sale more lucrative. The broker also has the knowledge to shape the deal into one that works for both parties.

Knowledge of administrative procedures: Brokers are skilled at handling the administrative procedures and legal aspects such as confidentiality agreements.

What are the disadvantages?

Cost: Usually the number one concern for most people is the cost associated with getting a business broker. Most charge a commission of up to 10% on the final sale price.

Different skills and qualification levels: Experience is more important than qualifications, so ensure that you find out your broker’s experience and skill level before starting. Broker incompetence can hamper the process significantly.

One-sided interest: While it’s advisable for brokers to be fair and to have interests of both buyer and seller in mind, this isn’t usually the case. Brokers usually work for the seller, so they will do their best to close the deal.

Controlling the sale price: Many brokers are looking for big sales. They work on a commission basis, so they will do their best to sell businesses that will give them the biggest commissions.

 

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