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.