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BUSINESS BROKERAGE - BUSINESS BROKERS
29
Jun 2018

BUSINESS BROKERAGE - BUSINESS BROKERS

By webmaster

The term is best described as “The role of a firm when it acts as an agent for a customer and charges the customer a commission for facilitation in selling a business or buying a business”.


Selling a business:


Acting as an agent simply means acting as a representative of the Seller while offering the business for sale.  The brokerage firm role in this process is to explain the business to potential buyers looking to buy a business including how much the business earns in revenue, a breakdown of expenses and the available cash left over after the expenses are paid to run the business.  Business brokers will conduct a review of several years of financial data and review them with an eye to explaining the upside potential of the business for sale they are representing.  When the business brokerage is engaged by the owner or representative of a business to market it for sale, the business brokerage will use multiple techniques to market the business to potential buyers.  Some of those techniques might include the prices that businesses in the same industry have sold for previously. The selling price might be structured as a percentage of the sales volume or a multiplier of the available cash flow the business produces.  Additional consideration is usually given to include potential advantages of the business to the buyer, such as growth potential, new market strategies, or efficiencies might currently be lacking in the business. The brokerage firm will explain highlights of the business for sale being represented and the attributes making the business desirable to a buyer.

Once listed for sale the business brokerage firm will call on potential buyers they may have worked with in the past or have current associations with and they will next confidentially list the business for sale on large online networks of Websites to entice potentially interested buyers to view the business based on the parameters mentioned above.  

In most instances the brokerage firm starts the process with the seller of a business for sale and will charge them a commission based on selling the business when it is sold.  However, the best business brokerage firms will also work with buyers.

 

Buying a business:


If acting on behalf of a buyer who is looking to buy a business, the business brokerage firm will offer to conduct business searches for a business that may not currently be on the market for sale.  These searches may target annual revenue, location, growth potential, or discretionary earnings. The buyer may also want the brokerage firm to help them negotiate a deal with the seller. In these instances, the commission is the responsibility of the buyer unless terms can be worked out with the seller.

To find out more about this concept give me a call. I will be happy to explain or discuss this exciting industry with you.

 

Michael Norman

The CBA Group

Michael Norman, Business Broker

 

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