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The Pros and Cons of Hiring A Business Broker

Business brokers can play a crucial role in facilitating connections between buyers and sellers, as well as assisting with business valuation and preparation for sale. Nonetheless, it is important to note that a broker should not be considered a substitute for a lawyer in any transaction. It is advisable for both parties to seek the guidance of legal counsel to safeguard and advocate for their respective interests. Without a local business lawyer guiding you, you might get caught blindsided. 

There’s a lot of compelling reasons why buyers and sellers of businesses frequently opt to engage the services of a business broker to facilitate the sale transaction.

Business brokers serve as intermediaries between business buyers and sellers, although their function extends far beyond that.

If you are considering buying or selling a business, it is advantageous to comprehend the functions that business brokers perform in the transaction. Here are some advantages and disadvantages to using the services of a business broker.

Should you hire a Business Broker to buy or sell a business?

When looking to buy a business, prospective buyers can get some benefits from an experienced business broker. Buyers can benefit from the guidance, resources, and counsel that brokers provide to aid in making informed decisions. 

Some buyers approach the process with a specific business in mind, while others may lack clarity on what they seek. With the abundance of businesses available for sale, the options can become overwhelming. A broker can assist buyers by consulting with them to narrow down the choices and select listings that align with their interests, abilities, and financial resources. This streamlines the process, enabling buyers to focus solely on businesses that may be a suitable match for their circumstances and saving them valuable time. This is one of the broker’s biggest assets, they connect the buyers and sellers.

Brokers should provide those looking to sell their business with a few services. This can include assistance in valuing the business, presenting the business to potential buyers, attracting buyers, and closing deals. 

When it comes to assessing the value of a business (and most importantly how much you can sell it for) business brokers can provide owners with extensive knowledge. Buyers might be more ready to buy if they see the price of a business aligning with their perspective. 

Brokers should be confidential. Keeping the sale of the business in confidence so that competitors, employees, suppliers and others are not informed that the business is for sale is important. These benefits are some of the main reasons that business owners and business buyers seek the help of a broker. 

The Disadvantages of using a business broker

Using a business broker offers numerous advantages, but there are certain situations where it may not be suitable for you. There are a few instances where you may want to avoid employing a business broker to sell your small business.

Avoiding Broker Fees

When working with a broker, commission payments are necessary and the associated fees can be considerable. If a business owner were to sell their company for $1,000,000 and their broker charged 50%, the resulting broker fees would amount to $50,000.

Therefore, some business owners may find the cost of using a broker to be unjustifiable and opt to sell their business independently, which could save them thousands of dollars.

Previous Experience Buying or Selling

Another reason someone might be against the idea of retaining a business broker is because of previous experience. Maybe you’re a ‘serial entrepreneur’ and you have experience closing deals. In that case you might even have some of the same experience a broker can bring to the table. So, finding a broker might not be in your best interest.

Even if you decide against engaging a business broker, you should still work with skilled professionals such as attorneys and accountants who can assist you in the sale of your business.

What can Sierra Crest do for you?

As attorneys, we bring a unique perspective to the table as business-people. We can empathize with both the aspirations and challenges of being a business owner, having walked in those shoes ourselves. Our extensive knowledge of the seven essential components of a thriving small business sets us apart.Our ultimate goal is to see your deal go through and be as beneficial for you as possible. Ready to sell your business? Give us a call.