Business Broker

What is 'Business Broker'

A business broker is a company that assists in the purchase and sale of companies. Business brokers help those who want to buy or sell a business. A business broker might specialize in selling companies in certain industries and might also specialize in selling businesses of a certain size (e.g., those with annual sales of at least $10 billion) or with certain unique characteristics (e.g., tightly regulated businesses).

BREAKING DOWN 'Business Broker'

Transferring ownership of a company is a complex process involving the determination of a fair price, making sure the company'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. They also add value by allowing the business owners to continue to focus on running the company while the broker focuses on selling it.