How to find a business acquisition broker

Like any important professional relationship, finding a business acquisition broker is partly about looking through listings and asking for referrals to someone competent, and partly about choosing a person who you will feel comfortable working with. You will probably want to interview several brokers before deciding on the best one for you. 

Here are some places to look:

• Search for business brokers. Type “business brokers” into any search engine, and you will find local options.The good thing about this approach is you will probably find many potential brokers. The challenging thing is it may not be obvious who is likely to be a good fit for your needs.
• Business for sale listings. Another approach is to search online and even scan local newspapers for businesses that are currently for sale. Very often, you will see the name of the business broker listed. This might help you identify the exact business you want, or at least a broker who is already working with similar businesses.
• Ask for referrals. If you know business owners who have bought or sold a business, they might be able to recommend someone. And, as you are assembling your business acquisition team, there’s a good chance your banker, accountant, attorney, or financial planner can recommend someone.
• Check the IBBA. The International Business Brokers Association trains and certifies business brokers, and its website allows you to search for local professionals by postal code.

Many business brokers will be competent, but some will be better than others. One way to help judge is to look at their track record. What percentage of their listings have they sold successfully? And what deals have they done that are similar to yours in terms of industry and geography?

What is a business broker?

A business broker is a person or company that helps to facilitate the purchase or sale of businesses — usually those at the small or independent end of the spectrum. They can help you look for a business to buy, assist with due diligence, determine a fair value, negotiate the purchase price, ensure everything is properly documented, and guide you through to successfully closing the deal. Business brokers are generally paid a commission based on a percentage of the business acquisition price.

Why use a broker?

There are many reasons to have a broker assist you with acquiring a business. Some of the reasons are merely administrative, and some of them can make a major difference in the financial and interpersonal dynamics of the business acquisition process.

• Setting objectives. A good broker can help you narrow down the kind of business you should buy. With their experience, they can help you focus your skills and interests on the right business opportunities. You may even discover that an industry you had never considered is the right one for you.
• Finding opportunities. A good broker is plugged into the local small business scene. They will have an ear to the ground and may know of deals that are not even listed yet. In fact, a broker may know of a business that perfectly meets your purchase criteria and isn’t even for sale, and might be able to approach the current owner and see if they want to strike a deal.
• Reducing risk. Business acquisition brokers see a lot of businesses and know what to look for and what to avoid. They can assist you with the due diligence process and may even be able to spot red flags and deal breakers before you get to that stage. In fact, good brokers won’t even get involved with business owners who want to sell if their financials don’t add up or if the price isn’t reasonable.
• Negotiating. Business acquisition brokers can really earn their keep during the negotiation process. They have a keen eye for what impacts the value of a business, and they can be candid and persuasive with the seller. If negotiations become tense, they can do what it takes to iron out a deal and still allow you and the seller to maintain calm and peaceful relations — something that can be invaluable when it comes time to transition the ownership of the business.
• Avoiding pitfalls. Brokers know what is required in terms of paperwork, licensing, permits, financing, and rules and regulations. All of this reduces the risk that you’ll miss some crucial form, fee, or step in the process.They may also know ways to work around certain hurdles which could save you weeks or months in the process.

Is a business broker expensive?

Brokers’ fees are negotiable and generally range from just a few percentage points up to 12 percent of the purchase price of the business. Generally, the smaller the transaction amount, the higher the percentage will be — or there may be a minimum fee. The question of who pays this fee depends on how the transaction is initiated. Generally speaking, if you hire a broker to find a business to purchase, you will pay the fee, and if a seller has placed their business on the market through a broker, they will pay the fee.

While it is not strictly necessary to work with a business broker, think of the cost of hiring on as a kind of insurance. You pay your broker to assess a fair value for the transaction, negotiate on your behalf, make sure you get the best price possible, ensure that everything is legal and properly documented, and get the deal closed and the ownership transitioned with minimal delays and headaches.

What is the best way to find a business acquisition broker?

Just like a realtor or a mechanic, the best way you find a business acquisition broker is by a referral from someone you trust. However, thanks to the increased transparency of the internet, you can also search business listings in your area and spot the names of business brokers who are involved in a large number of deals in your area and/or deals that look similar to your area of interest. It is always wise to meet with more than one broker to make sure the chemistry and rapport feel right. 

Capitalizing on your network

If you are already part of a business owner community, nothing beats an enthusiastic referral from someone who has had success working with a business broker. You should also check with industry contacts, accountants, lawyers, advisory board members, trade groups, and others for recommendations.

Broker websites

A quick internet search will turn up numerous business brokers. Some are individual brokers and some are sizable firms. They will all have different areas of expertise and fee schedules. Some may only work with business sellers, so take your time reviewing the options.

You may also find listings of businesses for sale on the broker’s websites. You can submit a query if you see something that interests you.

Passive searches

Many business brokers maintain a list of potential buyers that they keep on file for when opportunities arise. This is called a passive search, and you can generally join the list for free. You will typically be asked to provide detailed criteria about the type of business you’re looking for, such as the preferred industry and geographical area, your budget, your financial performance expectations, your need for vendor financing, and your past business experience. You may also be asked to provide evidence of your financial capacity to purchase a business and to sign a confidentiality agreement.

Active searches

Like a passive search, an active search will involve providing a business broker with details on what you are looking for, as well as a financial capacity statement and a signed confidentiality agreement. The difference is that the broker will not just passively wait for a suitable opportunity to come along, but rather they will actively search their network to find opportunities. Many of these opportunities will not be publicly listed for sale. In fact, it is not uncommon for business brokers to contact business owners to ask if they would consider selling.