What is Business Broker? Definition and Example

What is Business Broker?

The practice of purchasing or selling private business is definitely not uncommon. People like to enlist the help of business broker to do this activity for them. The broker becomes a middleman between buyer and seller of a business. Business broker provides consultation for clients (buyer and seller) so that they can make better financial related decision. It foresees the process since screening until the transfer of ownership is completed.

There is no specific regulation for business broker. People tend to rely on mouth-to-mouth recommendations and other forms of reviews to choose an intermediary. Business broker’s capability is also measured based on how many successful cases that it has handled. In some states, broker needs to have real estate license in order to conduct business legally.

Business Broker Definition

Business broker is a professional agent paid on commission that provides assistance in the ownership transfer of a business for both parties involved (seller and buyer). The agent is also often called intermediary. As a middleman, business broker presents buyer and seller perspective to its clientele. That way, both parties involved in the transaction will be able to reach a beneficial conclusion as equal as possible.

What Does Business Broker Do? Example

1. Screening Potential Business

Experienced broker will work with business that has potential for growth and which its owner opens up about the financial aspect. It will compile a list of potential business to offer to buyer client. This prevents client from being at the end of bad deal.

2. Business’ Value Estimation

Sometimes business owner has a trouble to estimate the value of their business. Broker is going to make calculation based on financial data of the business. The value estimation will help business owner determines the selling price.

3. Due Diligence Investigation

When helping a buyer making a purchase, business broker has to conduct due diligence investigation. It scrutinizes any information related to the prospective business in question, including escrow and profit. Buyer will be able to make better planning when all information has been laid out to them.

4. Providing Guidance for Legal Paperwork

Broker tends to be well versed and updated in legal side of business ownership transfer. It can provide guidance on finishing legal paperwork to ensure smooth transaction. This way, buyer and seller will not miss any detail that may hinder their steps in the future.

5. Negotiation Process

Business broker meddles in the negotiation process by making sure that buyer and seller come into an agreement smoothly. In this process, broker plays a pivotal role since it influences the decision of its client by making proposing several suggestions.

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