What is a Business Broker and What is Their Role?
A business broker assists in the sale of a small business which is privately owned and has an enterprise value of up to $3 million. Most companies with a higher enterprise value usually seek assistance from a mid-market boutique investment bank in case they want to sell their business.
The following are services commonly provided by business brokers:
• They help a client establish a probable price to sell a business
• Prepare marketing document and information of the company needed before a sale
• They look for business buyers
• They negotiate for prices, and when they reach a consensus they cater for the deal
When asked about fees, hire us to do restaurant brokerage – http://www.vancouverrestaurantbrokerage.com, told us: “Business brokers get their fees from commissions which are based on the enterprise values. The fees usually ranges from 5%-12% of the total value of the enterprise.”
When hiring a business broker, you are required to be very cautious of the following situations:
a) A business broker who comes from an outside region with an offer to foreign buyers that they will pay higher than what is offered in the market. In most cases, these brokers sign up an exclusive engagement where they collect a significant amount of fixed fees to prepare information memorandum and after this is done, they do not do much to deliver a legitimate buyer.
b) Secondly are the brokers who have a fee tail longer than one year after their termination. Here, the broker signs a clients and then introduces the opportunity to many prospective buyers who have little probability of success. Even if the business is not sold, the owner is supposed to pay the broker under their agreement. This is not fair to the owner because the owner does not bring any value to the deal but still gets paid for his/her minimal efforts.