Are you looking to work with a business broker but aren’t sure if it is the right option for you? Understanding the pros and cons of using a business broker can help you decide if they are the right choice for you when selling or buying a business. Using a business broker to buy or sell a business can streamline the process, but they are an added cost that you need to consider. The pros and cons of using one can vary depending on your needs, but we have outlined the main pros and cons you should consider in today’s brief guide.
What are the pros of using a business broker?
Working with a business broker comes with many pros that make it an excellent choice for buyers and sellers. When you work with a broker, you get their years of experience and industry expertise, help with the negotiation, and a more streamlined process. We have outlined the main pros below to help you see if a business broker is the right choice for you:
They have years of experience
Depending on the business broker you choose, they will come with years of experience that can be used to buy or sell a business. Many business brokers will be industry experts too, working within one specific industry, and will have the experience to ensure your business sells. If you had a tourism business, you would work with a tourism business broker, rather than a food broker who might not understand your industry in the same way.
The experience a business broker provides is invaluable, especially when it comes to the legal and financial aspects of selling and buying businesses. They can walk you through the paperwork and ensure everything is handled correctly.
They offer a streamlined process
Using a business broker provides you with a streamlined process that makes buying and selling businesses easier. Instead of you trying to do everything yourself or delegating to several different people, your business broker will handle the paperwork, due diligence, and closing logistics so you can focus on selling or buying the business.
They help with the negotiation process
The negotiation part of selling and buying a business is always challenging, but a business broker can help here. They will speak to both the buyer and seller during the negotiation to ensure a fair price and terms are secured. Brokers with experience in your industry will know what a good price and terms are for similar businesses and can ensure that your best interests are covered and you get the right outcome.
They provide market reach and access
A business broker will have a huge network that you can access, providing you with a list of potential buyers or businesses for sale. The longer your business broker has been in business, the larger their network will be, increasing the chance of finding someone for your business. The access they have to the market is unique to the broker, so do your research to find the best broker with suitable clients.
What are the cons of using a business broker?
Whistle using a business broker comes with many advantages, but there are a few cons that you need to be aware of before moving forward. The main drawbacks of working with a business broker include the added cost and the risk of conflicting interests. We have broken down the cons in more detail below to help you make an informed decision:
They can be expensive
Business brokers are an added cost, there is no getting away from that. Depending on the broker you choose, you could be parting with thousands of dollars, reducing the cash you have for the purchase of a business. You should do some research before choosing a business broker to find one that is right for your budget.
Many brokers will work based on commission, with a percentage of the sale price reserved for the broker. You can find this information in a contract before you start working with a broker and it is important you are aware of this and potentially other hidden fees before moving forward. Any reputable broker will be happy to discuss their costs with you so don’t be afraid to ask.
Conflicting interests can be an issue
There can be conflicts of interest between you and your broker, which can be problematic when buying or selling a business. A broker might have potential buyers they are pushing or a business sitting on their books for months that they are keen to offload on you. In these cases, they might not be acting in your best interests. You should do your research before working with a broker to reduce the chance of conflicts of interest.
Not all brokers are created equal
While every broker will claim to be the best, few of them are. Before working with a broker, you will need to conduct thorough research to avoid working with a sub-par broker. To find a reputable and reliable broker, make use of reviews and look for a broker that is transparent about their pricing and buying or selling process.
There isn’t a guarantee of a sale
While a business broker can seem like a guaranteed way to sell your business, there is no guarantee it will sell or sell quickly. Some businesses will sit on the market for months or years even when a business broker has been used. You will need to find a broker that is able to adjust strategies when this happens to ensure that a sale does happen.
Find your business broker today
While using a business broker comes with an added cost, it is an excellent way to broaden your options and find the perfect buyer for your business. When choosing a broker, we recommend a company like Lloyds Brokers. Their teams of brokers across the country have years of industry-based experience to ensure a fair price for your business. Contact them for a reliable business broker in Melbourne.
