If you're looking to buy or sell a business, a business broker can help handle all aspects of the sale.
Find out what a business broker does, when you may need one and what to look for when comparing brokers below.
What is a business broker?
A business broker is a third party that helps facilitate the sale of an existing private business. Brokers provide services for the entire selling or buying process and will generally work on commission. Once a broker is hired by one party, they become their representative in the purchase, with the other party becoming the broker's customers.
There are dozens of business brokers in Australia and many specialise in the selling of small or medium businesses, or specialise in a particular industry or type of business.
What does a business broker do?
A business broker can help with most aspects of a business sale or purchase and can work for either the buyer or the seller.
Some of the services a business broker may offer include:
- Providing an estimate of the business's value
- Advertising the business for sale
- Interviewing and negotiating with potential buyers
- Overseeing the due diligence process
- Organising the actual sale of the business
However, the services provided by a business broker will vary based on whether they're taken on by the buyer or seller, as well as the nature of the business involved and the specifics of the sale itself.
How much does a business broker cost?
Most business brokers work on commission, which is generally around 5–10% of the business's sale price. The rate a broker charges may depend on the type and size of business, the expected sale price as well as how much work the sale will involve. Some brokers may also have a minimum expected commission before they will accept you as a client, or may even charge fees upfront.
How to compare business brokers
- Cost. Business brokers generally operate on a commission basis, but the specific rate charged will vary by broker and by the nature of the business for sale. When comparing different brokers, it's important to determine their commission structure and whether there are any additional fees or charges you'll have to pay as part of their service. A business broker is likely to extend the potential buyer pool for your business and will also save you the time and hassle of organising all aspects of the sale or purchase. This should be factored in to your decision when deciding if hiring a broker is suitable for your situation.
- Experience. Some brokers may have more experience handling the sale of specific types of businesses, or working within certain industries. For example, a certain broker may specialise in the sale of businesses in the hospitality industry, potentially making them a better fit if your business is a restaurant, cafe or bar. In Australia, business brokers also need to have a licence to operate, so it's important to check this is the case with any broker you're considering.
- Services provided. While most brokers can facilitate all aspects of the business sale so you should check that a particular broker can handle the particulars of your business sale.
- Communication. While this may be difficult to determine before you actually sign with a broker, it's vital your business broker is transparent and punctual when it comes to communication. When first contacting a potential broker, you should try to get a sense of their level of communication, as you will be relying on them to provide regular updates through the sale process.
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