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Business brokers are, in essence, intermediaries or go-betweens facilitating relationships between buyers and sellers.
A business broker—true to the nickname, business transfer agents or business intermediaries—will help estimate the value of a private business prior to its advertisement and eventual sale.
Business Brokers are Tactful and Discrete...
What's really nice for both the buyer and seller is that business brokers also handle things discretely.
This means that business brokers typically advertise a business to a handful of potential buyers without disclosing the identity of the seller, as this could disrupt business or cause people in the industry to panic. There's a lot that happens before advertising a business, though.
The value of a business broker actually lies a good deal of their discretion. Business brokers can discretely "shop around" for the ablest buyers then foster a dialogue between buyer and seller without tipping off any third parties, so to speak.
After doing independent research and consulting with a few potential buyers, a business broker might tactfully inform the buyer that the price or requirements for purchase were a tad too high.
If both the buyer and seller want this kind of arrangement, business brokers can even act as go-betweens or referees that go back-and-forth on particular sticking points until both sides can reach an agreement that's seen as a win-win.
To get to that point of a win-win scenario for buyer and seller, however, takes a lot of work—taken usually on behalf of the seller—in the form of pre-screening, interviews, ongoing dialogues, due diligence investigations, and the sale itself.
…And Business Brokers Wear Many Different Hats
When a lot of people hear about pre-screening candidates, they automatically think that you're talking about filtering out unqualified potential buyers. While that can happen, some of the filterings come down to eliminating sellers. Why would a business broker do that?
In certain circumstances, sellers might leave certain areas of their operation murky or refuse to divulge a full financial disclosure, which could obviously cause problems for a business broker seeking to convey all of the merits of a private business to a pool of potential buyers.
If you don't know what the entire financial history and untapped opportunities are for a particular business, conveying a full picture to would-be buyers can be difficult.
On the buyer's side, though, business brokers can work with you to discover the types of businesses that might be right up your alley and ripe for purchase.
This isn't always as intuitive as potential buyers would like to believe since passions, skills, hobbies, finances and interests don't always line up…let alone line up with the opportunities currently on offer.
Business brokers, though, can steer you towards entire industries that you might not have previously considered.
Value, Advertise and Investigate
Business brokers obviously also appraise private businesses and advertise those businesses discretely as well.
This step can be tricky and always involves the business broker taking a deep dive into the industry, its prospects, and the tangible (e.g., property) and intangible assets (e.g., brand equity) to determine the fairest initial asking price.
After discretely advertising and marketing a private business to interested buyers, a business broker will then work with lawyers, accountants and landlords to smoothly transition the business from one party's hands to another's. Business brokers might even look into business acquisition loans for buyers as well.
Financial due diligence investigations and management audits will both also be part of the picture. Business brokers additionally reduce risk by reminding buyers of applicable fees, permits and industry regulations.
Are Business Brokers and Franchise Brokers the Same?
Not quite. The biggest difference between business brokers and franchise brokers is that the latter is working with a franchise—instead of a private seller or agency—to find promising investors for a franchise opportunity.
Similarly to business brokers, though, franchise brokers come up with a list of dozens of acceptable opportunities to present buyers or investors as the case may be.
Franchise brokers screen candidates in a similar way, handle talks between franchisors and potential investors, and try to link up financially suitable candidates to franchises where they could really flourish.