Many are familiar with the role of a business broker for sellers. However, buyers can greatly benefit from using a business broker as well. This is a less discussed topic, unfortunately, but it is crucial to ensure you have the right team in your corner that allows you to choose the right business and secure a great deal financially. In this review, we discuss the role of a business broker for buyers and the benefits the broker offers.
The Role of a Business Broker Explained
A business broker (specifically one who represents the buyer) helps the buyer connect with a business seller. More specifically, they advise the broker throughout the buying process, answering any questions they have and helping them secure the best purchase deal possible.
Business Broker for Buyers: What are The Benefits?
There are numerous benefits you receive when you choose a qualified business broker to help you buy a company. Below is a detailed explanation of each of the most noteworthy benefits.
The Business Broker Has Your Interest in Mind
In so many cases, the buyer relies upon the seller’s broker to facilitate the deal. However, as you might imagine, they are biased toward getting the best deal possible for the seller, and they are far less concerned with ensuring the buyer receives a good deal. By having a broker of your own, you can ensure you receive reliable information and have a full understanding of the fair market value for any companies you consider. Your broker can also work on your behalf to negotiate generous purchase terms for you.
The Business Broker Knows How to Find Sellers
The primary role of your business broker is to pair you with company owners that are selling a business that matches your criteria. Business brokers have extensive access to businesses that are listed, most of which are companies that are only advertising the company privately. A business broker for buyers understands how to connect with sellers (and their broker) to find you as many possible companies to purchase as possible. This provides you with more to choose from and helps ensure that you reach a great purchase deal for the right business.
The Business Broker Understands Business Valuations
It is incredibly important to properly value any companies that you are considering. This goes beyond simply applying the SDE or EBITDA the seller calculates and gives to you with rule-of-thumb data. Instead, you should conduct your own valuation for any companies you consider. The only way to reliably do this is to work directly with an experienced business broker who offers services for buyers. They can conduct a market approach and ensure you are not paying more than you should.
The Business Broker Can Help You Get Financing
Unless you pay the entire purchase amount yourself at closing, you will need some form of financing to fund the payment for the business. There are two primary ways of financing. The first is to receive it from a financial institution. Depending on your industry, credit history, etc., this can prove challenging.
The second way is through seller financing. In this case, the seller would allow you to make payments for the company over time until the entire purchase amount is paid. A broker understands how to effectively negotiate financing to help ensure you can afford the company you are most interested in purchasing.
The Business Broker Provides Experienced Negotiation Skills
Business brokers handle negotiations with every deal they complete. They understand how to negotiate a great deal on your (the buyer’s) behalf to ensure you do not pay more than what is reasonable and fair according to the company’s value and market conditions.
They can also help ensure your non-financial desires are negotiated as well. For instance, it may be important to you that the current owner be involved in the transition, in which case the broker can make this clear and help ensure it is included. Also, keep in mind that the negotiation stage can become emotional for many buyers and sellers, so it is always a good idea to allow the professionals in your corner to assist you as much as possible.
The Business Broker Can Help You With The Legal Details of a Sale
You may also have a mergers and acquisitions attorney on your team to assist you with the sale. However, an experienced broker who works with attorneys may be all you need to ensure the legal components of a sale are accounted for and followed. Otherwise, understanding legal documents such as non-disclosure agreements (NDAs), confidential information memorandums (CIMs), letters of intent (LOIs), and more may prove difficult, leading you to become locked into a deal with which you do not wish to proceed.
The Business Broker Can Save You Time and Money
As an entrepreneur, your time is precious and valuable to you. You do not need to spend countless hours searching for companies to purchase or dealing with the complexities that are involved with the buying process. You also do not need to wonder whether or not you are receiving a fair deal as you are unsure about the quality of your valuation.
Instead, you can ensure a successful sales process that allows you to spend more of your time on other obligations and doing the things you love. You are also likely to save money even after you pay the broker as they can ensure you get the best deal possible for the right company that has excellent long-term growth potential.
Meet With Our Business Broker Before You Start Buying a Business
Purchasing a business is one of the most important decisions you will ever make. For this reason, we strongly recommend trusting a business broker to help you with your sales journey. You can contact our business brokerage at Sigma Mergers and Acquisitions today for answers to all of your questions and to get the purchase process started.