How does business brokers work

Why do you need broker for your business

 Since 2012, I have sold companies and their shares to new owners five times and have done it three times through intermediaries. During this time, I managed to communicate with participants in this market in St. Petersburg and Moscow, sign a dozen agency agreements and experience a conflict situation related to default on the part of the agent. In this article, I have systematized the experience gained. 

 Who are business brokers and how do they make money? 

Business brokers or salespeople are specialists in searching for investors and conducting transactions for the sale and purchase of companies and assets. The broker's key competencies are to quickly find a buyer and close a deal on mutually beneficial terms, as well as to reduce the risks of the parties. 

There are private practitioners and agencies on the market - companies that provide comprehensive services for the sale of a business. The activities of business brokers are not regulated or licensed in any way, so the market is open for new players.  

Business brokers earn commissions from transactions, on average, it is 7-10% of the asset value. Typically, the commission is paid by the seller of the business upon completion of the transaction. An additional source of income for agents is the sale of additional services, such as checking a business, preparing it for sale and legalizing transactions. 

The activities of agents selling a business are in many ways similar to real estate, especially since sales business combined with the sale of real estate or rights not to it. By the way, this is why brokers are more efficient in transactions with businesses that own or lease some premises. 

In my experience, brokers are effective in selling typical businesses like beauty salons, cafes and online stores worth up to 3 million rubles. If the business is associated with a unique technology, has a high added value or other competitive advantages that significantly affect the price, try to look for a buyer yourself. Intermediaries will not be able to help, as they do little work with non-standard business models, and you are unlikely to be able to reach an understanding on business valuation.

Why do you need a business broker? 

The scheme of a business selling agent looks like this: a client who wants to sell a business turns to him, the broker clarifies the details and concludes an agreement with the client for the provision of services. Next, the intermediary examines the business in detail, visits the company's office (if any), examines the management accounts and agrees the selling price with the buyer. After that, the broker creates an advertisement and places it on his website, on partner websites and third-party resources such as Avito. 

A good, motivated broker will definitely actively search for buyers - using direct calls and mailings profile investors. 

When choosing an agent, try to collect more feedback from clients for closed deals - this information can be found on the intermediary's website. Find contacts of both parties to the transaction and talk to each - this way you will get full information about the broker's reputation. 

You should not work with agencies that insist on exclusive cooperation or impose paid additional services. Another alarming sign - the broker's unwillingness to leave and inspect the object of sale - this indicates the "flow" method of work and the intermediary's unwillingness to spend additional time and delve into the details of the business.  

After the conclusion of the contract for the provision of services and to get started, ask the broker to send a link to the advertisement he created - make sure that the information is correct.

What to look for? 

Business brokers attract customers by promising safer business deals with them. In advertising, they broadcast that they do not work "with everyone" and check the companies put up for sale, filtering out unreliable ones. 

In fact, intermediaries work with a large flow of objects and are physically unable to thoroughly check all businesses who are selling. They take into work the assets of all sellers who turn to them, if the declared price seems adequate to them. The only way to achieve a real verification of an asset is to insist on such a procedure and conclude a separate agreement establishing the responsibility of the contractor for the quality and reliability of the information provided. 

Business brokers are interested in the soonest sale of the company and understand that the most effective the way to quickly find a buyer is to lower the price. Yes, intermediaries are interested in increasing the commission, but the speed of closing deals is even more important - it is more profitable to quickly sell several objects cheaper than the market than to look for a buyer for an expensive and complex asset for six months. 

For this reason, brokers often persuade the seller to reduce the price, arguing by the presence of similar offers at a lower price, the crisis and a “buyer's market.” 

The larger the agency you contact, the more transactions are carried out and the less attention is paid to each asset. It is beneficial for a broker to work with standard objects and close deals as quickly as possible. In such conditions, the agent is unlikely to delve into the specifics of the business and develop a unique promotion strategy - during this time he will sell another online store or beauty salon.Therefore, I stopped working with brokers and concentrated on finding buyers for my companies on my own. 

Recently, large players began to offer clients paid services for additional advertising of objects, such as search highlighting of advertisements for sale on the site, email distribution, phone calls to the database, professional photography, VIP status assignment and others. Some market participants have gone further and form service packages, imposing them upon the conclusion of contracts. Such services are paid in advance without guarantees of efficiency, and the cost reaches several hundred thousand rubles. 

When considering such offers, remember that the main income of the intermediary is the commission from the transaction and for his effective work it is important that he does not receive any promotion, you can completely deprive the agent of motivation - why waste time looking for a buyer if the income has already been received, and the freed up resources can be spent on selling similar services to the next client?

An agreement with a business broker 

The purpose of standard agreements for the provision of services offered by brokers to clients is to protect the interests of an intermediary, that is, to ensure that a commission is received from a transaction. This is easy to see by comparing the lengths of the text in the sections of the contract dealing with agency and client liability. They are about situations where a business is directly sold to a buyer found by an agency, without the involvement of that agency. For such situations, a serious fine is imposed on the guilty party, so carefully read the wording - figure out how it is determined that the buyer is found by the agency, and not by the buyer directly. 

You may be offered to sign a so-called exclusive contract , in which the search for a buyer is entrusted to a single agent without the right to sell the business in another way - directly or through another broker. Such an agreement is beneficial to the intermediary - he is insured against a situation when resources are spent on advertising a business, and someone else has found a buyer. Such contracts should not be signed for two reasons - firstly, the resources of one broker, even if it is a large and well-known company, are limited, and you narrow the circle of potential buyers who will have access to information about the object. Secondly, you take on unnecessary responsibility - penalties under exclusive contracts are high, but the buyer can come to you directly. 

Involve several brokers in the sale of your business - this way you will increase coverage, you will not take on additional risks, allowing the best agent to prove yourself. 

Do not agree to advances to brokers - keep a balance of interests and remember that the main thing is the result, and the agent must be interested it is the same as you.



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