Business brokers , also called business transfer agents , or intermediaries , helps buyers and sellers of personal businesses in the buying and selling process. They usually estimate the value of a business; advertise it for sale with or without disclosure of its identity; handling initial buyer interviews, discussions, and negotiations with potential buyers; facilitate the progress of a due diligence investigation and generally help the sale of the business.
The agency relationship in a business ownership transaction involves a representative by a business broker (on behalf of a brokerage firm) of the sales principal, whether the person is a buyer or a seller. The main broker (and his agent) then becomes an agent of the principal, which is a brokerage client. The other party in the transaction, which has no agency relationship with the broker, is the broker's customer.
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Agency relationships with clients and customers
Traditionally, brokers provide broker-based conventional full service commission relationships under agreements signed with sellers or "buyer representation" agreements with buyers. In most states it creates, under general law, agency relations with fiduciary duties. Some states also have laws that determine and control the nature of representation and have certain business broker licensing requirements.
The agent relationship in a business ownership transaction involves a representative by a business broker (on behalf of a brokerage firm) of a sales principal, whether the person is a buyer or a seller. The main broker (and his agent) then becomes an agent of the principal, which is a brokerage client. The other party in the transaction, which has no agency relationship with the broker, is the broker's customer.
Transaction broker
In some US states, a business broker acts as a transaction broker. The transaction broker does not represent the party as an agent, but serves to facilitate transactions and transactions with both parties on the same level of trust.
Duplicate or limited agency
Double agents occur when the same broker represents the seller and the buyer under a written agreement. The laws of individual states vary and interpret multiple agents somewhat differently.
- If state laws permit the same agent to represent buyers and sellers in a single transaction, brokers/agents are usually considered as dual agents . Special laws and rules often apply to multiple agents, especially in negotiating prices.
- In some US states (especially Maryland), multiple Agents can be practiced in situations where the same broker (but not the agent) represents the buyer and seller. If one brokerage agency has a registered business and another agent of the broker has a buyer broker agreement with a buyer wishing to purchase a registered business, a double agency occurs by allowing each agent to be designated an "intra-enterprise" agent. Only the main broker itself is a double agent.
- Some countries allow brokers and one agent to represent both sides of a transaction as a double agent. In such situations, conflicts of interest are more likely.
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Service types that business brokers can provide
Brokerage services vary greatly depending on the practice and expertise of the broker. The most common services provided by brokers to clients are:
- Assist clients in setting MPSP Values ​​- Valuable Sales Price Assessment; the techniques used by each broker can vary greatly in this process.
- Develop a comprehensive Information Memorandum about the company; typically a 15-30 page document that outlines the business for potential buyers.
- Perform a buyer search.
- Exposure - Market business to potential buyers.
- Screen buyers for ability to complete purchase.
- Coordinate and advise on structuring agreements.
- Provides overall agreement management to guide clients through the entire process.
- Help keep your sales confidential.
- hourly consultation at a cost, based on clients' needs.
Probably one of the biggest services provided by brokers is the ability to allow owners to stay focused in running their business during the sales process, which can take an average of 6 months to 12 months to complete.
General
The seller and the buyer themselves are the principals in the sale, and the business broker (and the main brokerage agent) are their agents as defined in the law. However, although business brokers usually fill in bids to buy forms, agents are usually not given power of attorney to sign bids to buy or close documents; the principal signs these documents. Each business broker can enter their broker on a contract as an agent for each principal.
The use of a business broker is not a requirement for the sale or delivery of a business or to obtain a small business loan or SBA from a lender. However, once a broker is used, a special escrow attorney sometimes called a settlement lawyer (very similar to a Real Estate Closure) will ensure that all parties involved will be paid. Lenders usually have special requirements for business-related loans or SBAs.
The market served by business brokers generally involves selling a business with a transaction value of less than $ 10,000,000. Larger private companies are classified in the mid-market and will employ companies that specialize in mergers and acquisitions (M & A). However, business brokers do participate in merger and acquisition activities when they involve transactions between two or more small companies. Business broker and M & amp; A company engages in overlapping activities in extreme markets. These extremes are called transitional markets, or transmarket .
Business brokers and sellers
Services provided to sellers as clients
After signing a listing contract with a seller wishing to sell the business, the broker seeks a commission by finding a buyer for the seller's business at the highest possible price on the best terms for the seller. To help reach the goal of finding a buyer, a business broker usually does the following:
- Ensure confidentiality - Brokers have established systems to protect the confidentiality of a business.
- Assessment - Most business owners do not know what the value of their business is. Business valuation is complicated. The most experienced business brokers have at least some formal training in business valuation and can help business owners understand the market value of their business, at least enough to set the asking price.
- Market knowledge - Brokers make a living selling a business. They are in the market every day talking to buyers. Local business brokers usually understand the local market as well as what is business-worthy.
- Save time and stress
- List businesses for sale to the public, most often on at least one of the main business websites for sale, in addition to other methods.
- Under the laws of some states, provide the seller a disclosure form for business conditions, and any other forms that may be required.
- Set up the required papers that describe the business for advertising, pamphlets, tours, etc.
- Advertise a business. Ads are often the largest outside costs of registering a business.
- Be the available contact person to answer any questions about the business and the appointment schedule
- Make sure buyers are filtered so they have financial qualifications to buy the business; The higher the buyer's financial qualification, the more likely the closure will work.
- Negotiate the price on behalf of the seller. Selling agent acts as a fiduciary for the seller. By not being emotionally tied to the transaction, the business broker is in a position to negotiate more effectively on behalf of the seller. This may involve setting up a standard offer to buy a contract by filling in the blanks in the contract form.
- Negotiate the assignment of lease or transfer of facilities, negotiate with creditors, help buyers obtain financing.
- In some cases, holding a serious payment in escrow from the buyer until closing. In many countries, closing is a meeting between buyers and sellers where business ownership is transferred and the name of the business is delivered.
A business broker attracts potential buyers in a variety of ways, including listing the limited details of the business available on their website and advertising on larger business-to-sale websites. Only in rare cases this time extends to print media advertising. Brokers also directly approach prospective buyers and sellers to measure interest. Most established business brokers have a large number of directed buyer prospects - or know other business owners - who have seen other opportunities through brokers, but who are still actively looking to buy a business.
"Listing" contract
While there are other ways of doing business, business brokers usually earn commissions after the business broker and the seller enter into the listing contract and meet the agreed terms specified in the contract. The seller's business is then registered for sale, often on one or more business-to-sale websites, in addition to other ways to advertise or promote business sales.
In most of North America, the listing agreement or contract between the broker and the seller should include the following:
- The start and end dates of the agreement
- The amount of compensation due to the broker
Brokerage compensation
There are three forms of broker compensation: hourly, retainer, and cost of success (commission on closing). Brokers may use one, or a combination of these when providing the service. The most common form of compensation is the commission on the cost of success where commission payments to a broker depend on finding a satisfactory buyer for the business being sold, negotiating a successful purchase contract between a satisfactory buyer and seller, or completion of a transaction and the exchange of money between the buyer and the seller. Just like the big investment banks that usually charge retainers for services, more business brokers are beginning to embrace this practice as well. Retainers help cover upfront costs incurred by brokers to perform services and demonstrate commitment on the part of the client (seller or buyer) that they are serious. Certain types of M & amp; A involves securities and may require that intermediaries are securities licensed in order to be compensated.
In North America, a successful cost commission ranges from 5% to 12%. Usually, the smaller the transaction, the greater the commission. The "Main Street" business, which has a firm value of between $ 100,000 and $ 5,000,000 can expect an average commission of between 10-12%.
Followers, when charged, ranging from as low as $ 2,500 to $ 25,000, are typically associated with the size and complexity of anticipated transactions. They are usually non-refundable, but are most often deducted from commissions paid upon closing. Commissions determined between the client (seller or buyer) are usually paid at closing. Midsize market transactions are larger using Lehman or Double Lehman scale.
Standard commissions tend to be lower in the United Kingdom (see Lehman Formula). Commissions can be negotiated between the seller and the broker. The commission can also be paid as a fixed cost or a combination of fixed costs and percentages, especially in the case of lower priced businesses, businesses with millions of dollars, or other unusual business assets. The details are determined by the listing contract.
From the commissions received from the seller, the broker will usually pay all expenses incurred to do the work of trying to sell the listed business, such as advertising, etc.
All compensation to brokers paid by third parties should be disclosed to all parties.
Business broker licenses
In the US, business broker licenses vary by state, with some states needing licenses, some not; and some require a license if the broker is assigned but does not require a license if the broker works on an hourly basis. The state rules also vary about the acknowledgment of transnational license holders, especially for types of interstate businesses such as national franchises. Some countries, such as California, require a broker license or legal license to even advise business owners about sales issues, sales terms, or the introduction of buyers to sellers for a fee. All Canadian provinces with the exception of Alberta, require a real estate license to start a career. According to an IBBA convention seminar in 2000, at least 13 countries require business brokers to have real estate licenses. The following countries require a license to practice as a business broker: Arkansas, California, Colorado, Florida, Georgia, Idaho, Illinois (registration only), Michigan, Minnesota, Nebraska, Nevada, Oregon (only if real estate transfers are part of the transaction) , Rhode Island, South Dakota, Utah, Wisconsin, and Wyoming.
Some types of M & amp; A involves securities and may require these "intermediaries" to be licensed securities in order to be compensated.
References
External links
- Business broker in Curlie (based on DMOZ)
Source of the article : Wikipedia
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