When you decide to sell your business it is really important to have a business broker by your side. At the same time, you need to understand their work, their role in the sale of your business and their obligations as a mediator. With that in mind, here are the details you need to know to properly understand the role of a business broker in buying or selling a business.
- An agent for both the buyer and the seller:
Once you hire a business broker, you’re supposed to sign a contract with them. This contract, among many other things, specifies their duties and obligations towards you and your business. In this case, this broker is your agent and is also known as the listing agent. His work is to represent you when it comes to dealing with the buyers. He should also ensure that the deal is in your best interest and he is obligated to share information with prospective buyers that he is going to encounter during the process of listing your business for sale.
- Dual agent:
Business brokers can work individually if they are registered under the government or they can also work under a government registered brokerage firm. It is a very common possibility if one broker in a firm lists a business for sale and another broker working under the same firm is representing the buyer. But even in such a coincidence, the agents or the business brokers are required to maintain the details of their respective parties with utmost confidentiality. You can ensure this by signing a contract with your agent. Also, the duality of the agency should be disclosed to both the buyer and seller parties well before in time.
If a business is bought or sold in a known circle, then there is not much use of a business broker to be hired. However, there still is a possibility of having a relative as a mediator who works in favor of the deal from both the seller’s and buyer’s side. In this case, this individual is known as the facilitator who is assisting both parties towards the deal and does not represent either party in particular. Having a facilitator is particularly important if you are buying a local business. For example, if you are interested in businesses for sale in san Diego, then make sure you have a broker who is based in San Diego to help you negotiate your deal so you can get the best possible price for the business.
- Other factors:
Ultimately, a business broker has a financial interest in the transaction. A business broker is always paid a particular fee, which can be paid on a monthly basis or in a fixed amount that is paid in installments before and after the deal is locked. The higher the price of sale, the higher the commission is. So, before you hire a broker and put all your blind trust in them while giving them the confidential details, you should always make sure to check their track record along with their customer ratings or references if possible.