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What are Business Brokers?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 30 October 2016
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Business brokers are professionals who function as the point of communication during the sale of a small business. The broker mediates the transaction by working with both the buyer and the seller to develop the terms and conditions that govern the completion of the sale, including the purchase price. Sometimes referred to as a business transfer agent, a small business broker handles the process of assessing the worth of the business, establishing a sale price with the current owner, and advertising the sale to interested parties. In many instances, business brokers do not disclose the identity of the seller or the company until well into the negotiations.

Business brokers usually have a background in finance or real estate and receive additional training from state or national associations in the country of origin. The training is normally geared toward the achievement of two goals. First, the courses help to establish and define the standards that the broker is expected to uphold in each business transaction. Second, the information contained in the course work ensures that the broker is exposed to all data that is likely to be found on a written examinations required for licensing. After the initial training, many associations offer continuing education courses that help business brokers to stay abreast of the latest changes in government regulations and to aid in the continual enhancement of their skills.

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Anyone who is trained as a business broker can choose to function as an independent broker or become part of a business broker franchise or brokerage firm. There are advantages to both situations. Independent business brokers are often able to pick and choose clients, making it possible to specialize in the sale of businesses within a specific industry. Business brokers who choose to work for a brokerage house may deal with a wide range of customers, but usually have more resources at their disposal than independents. The training and licensing process is usually the same in either scenario.

Broker franchises may be local or regional, providing services to buyers and sellers within a relatively small geographic area. Others, such as Sunbelt Business Brokers, operate on a global scale, maintaining multiple offices in many countries around the world.

In some areas of the world, business brokers also function as transaction brokers. This means that the broker is essentially working with two clients at one time, the buyer and the seller. More commonly, a business broker is associated more closely with the seller, although the broker is also likely to have some degree of interest in the satisfaction of the buyer as well.

As part of the process of securing potential buyers for a small business, business brokers often utilize a screen process. The process generally involves verifying the financial capability of the buyer to pay for the business. This helps to weed out buyers who either do not have the resources to acquire the business or who are not particularly serious about arranging a business deal. Qualifying potential buyers makes it possible for the broker to focus his or her energies on viable prospects instead of wasting time on negotiations that are likely to go nowhere.

For the most part, business brokers focus on the sale of private companies. By keeping the name of the business and the owner confidential, the broker prevents his or her client from being adversely impacted by word on the street that the business is up for sale. This preventive measure helps to ensure that the seller receives the best price possible while still retaining full consumer and market confidence in the company during the search for a new owner.

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