Business Broker

AAA

DEFINITION of 'Business Broker'

A professional who specializes in the purchase and sale of companies. Business brokers help individuals and businesses who want to buy or sell a business. A business broker might specialize in selling companies in certain industries, such as restaurants, retail, manufacturing or hospitality. A business broker might also specialize in selling businesses of a certain size (e.g., businesses with annual sales of at least $10 billion) or with certain unique characteristics (e.g., tightly environmentally regulated businesses).

BREAKING DOWN 'Business Broker'

Transferring ownership of a business is a complex process involving determining a fair price for the company, making sure the business’s finances and financial records are in order, negotiating a price, going through escrow and closing the sale. Business brokers not only manage these steps, but also ensure confidentiality by requiring interested buyers to agree not to disclose the details of the potential business sale. Business brokers can also help with licensing and permitting requirements and can weed out unqualified buyers.

A good way to gauge a business broker’s success is by looking at the percentage of businesses they’ve sold out of all the businesses they’ve tried to sell. Aside from the desire to get professional help with a complicated transaction, companies hire business brokers to increase the likelihood that the business will sell at all. Business brokers have relationships with people seeking to buy businesses as well as those seeking to sell. They also know how to market a business for sale. Business brokers are paid through commissions based on a percentage, typically 10% to 15%, of the sale price they secure for the company.

Those wishing to buy or sell a business can locate business brokers through attorneys, accountants, professional associations and the International Business Brokers Association. Business brokers may work independently or as part of a larger business brokerage firm. Business brokers have specialized knowledge of the tax and legal implications of selling a business. Business brokers also add value by allowing the business’s owners to continue to focus on running the business while the broker focuses on selling it. 

RELATED TERMS
  1. Broker's Open House

    An event designed to showcase one's home for sale to other real ...
  2. Brokered Market

    A marketplace where buyers and sellers are brought together by ...
  3. Power Broker

    An individual who, through his or her connections, is able to ...
  4. Outside Broker

    1. A real estate salesperson and deal facilitator who works for ...
  5. Brokerage Supervisor

    A brokerage company employee who appoints, trains and manages ...
  6. Broker Of Record

    In insurance, a broker of record is an agent designated by the ...
Related Articles
  1. Brokers

    Top Broker Excuses For Poor Investments

    It is not uncommon for investors to lose money through misselling or other forms of mismanagement.
  2. Home & Auto

    5 Mistakes That Make House Flipping A Flop

    If you're just looking to get rich quick, you could end up in the poorhouse.
  3. Home & Auto

    Real Estate Flipping: 8 Disclosures You Must Make

    If you don't tell potential buyers about these situations and possible hazards, you could find yourself in court. Here's how to profit – and stay out of trouble.
  4. Professionals

    8 Ethical Guidelines For Brokers

    We examine the less obvious ethical dangers faced by a broker, and help you avoid trouble in ethical gray zones.
  5. Bonds & Fixed Income

    Interpreting Your Broker's Reports

    Broker's reports can be confusing, but they don't have to be. Find out what information you need from your broker.
  6. Brokers

    Career Comparison: Real Estate Agent Or Mortgage Broker

    If you're considering one of these careers, this article is designed to help you make a logical choice between the two.
  7. Options & Futures

    Brokers: Do You Want To Sell Stocks Or Insurance?

    Know the difference between working as a broker or an insurance rep.
  8. Brokers

    Is Your Broker Ripping You Off?

    We show you how to resolve a problem without getting the lawyers involved.
  9. Options & Futures

    So, You Want To Take Your Broker To Court

    Find out how to file a claim with your broker and what you can expect throughout the process.
  10. Fundamental Analysis

    Calculating Return on Net Assets

    Return on net assets measures a company’s financial performance.
RELATED FAQS
  1. Are acquisitions only for large companies?

    Mergers and acquisitions (M&A) often make headlines. However, the companies that make the news rarely represent the types ... Read Full Answer >>
  2. How do you flip a home?

    Flipping (also called wholesale real estate investing) is a type of real estate investment strategy in which an investor ... Read Full Answer >>
  3. How is market value determined in the real estate market?

    Anyone who has ever tried to purchase or sell a home has probably heard a lot about the property's fair market value, or ... Read Full Answer >>
  4. What is the difference between adjusted and regular funds from operations?

    While regular funds from operations measures the cash flow generated by the operations of a real estate investment trust ... Read Full Answer >>
  5. What is the interest rate offered on a typical margin account?

    Interest rates on margin accounts vary according to the size of the loan and the brokerage firm being used. Generally, interest ... Read Full Answer >>
  6. What are examples of typical leasehold improvements?

    Typical leasehold improvements include partitioning a large, open space into smaller, more structured areas such as dressing ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  2. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  3. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
  4. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
  5. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
  6. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!