These people a seller would approach to sell their company – are first cousins of estate agents. We fall under the Estate Agents Act and they must be registered with the Estate Agents Board and hold a fidelity fund certificate. We work on a commission only basis paid usually on the conclusion of a sale. Brokers are normally appointed by the seller. Our function is to bring a willing buyer and seller together, not to check the business out or give guarantees or undertakings. That is for you, your attorney and accountant. Brokers do not earn enormous commissions. We earn a commission only on successful conclusions of a sale and sales often collapse. Result: no payday for the broker.
All you want to know on the first call to a broker is where an advertised business is so you can drive by and look. This is not how it works. Our duty to the seller is to be confidential and give information only to qualified buyers and we must protect our claim on commission. We have no way of knowing whether you are a competitor of the business or another broker touting for work.
You expect the broker, armed with limited information, to find a suitable buyer. An owner of a successful restaurant withheld provable figures, set an inflated cash price, listed with every broker in town and stipulated a 50% commission. Forget it. Our greatest costs are time, advertising and travel. Only businesses with the best chances of selling, because the seller made the information available, are worth the cost and work.
Broker becomes bloodhound
Shop around for a broker with experience and a track record. Candid provision of business information or your requirements will convince him you are a genuine buyer or seller and the commission is there if he performs. Buyers: Don’t look only at the latest listings of businesses for sales. Often the best fail to be snapped up for months. They may have been overpriced, listed as “cash only”, or they have withheld figures. A genuine seller will drop the price, open the books and negotiate terms.
What can a buyer expect from a broker?
- Correct qualifications;
- To be offered opportunities meeting requirements and his pocket;
- All the information needed for an educated assessment;
- Help with additional information;
- Negotiation on your behalf with the seller;
- Preparation of a sale agreement;
- Help with raising finance;
- Advice on documentation.
The seller can expect
- Advice on determining a value;
- A list of information required;
- Confidentiality in negotiations;
- Qualified buyers;
- A marketing/selling plan;
- Feedback on buyers;
- Viewing by appointment; and,
- Best price and terms.