Brokers are very active and influential players in todays sophisticated corporate world of business. A broker in the business context can be described as an individual or party that arranges transactions between a buyer and a seller on commission basis when the deal is executed.There are however advantages and disadvantages in using broker services. Advantages are:
Business valuations – A broker can be counted on for accurate valuation of the business up for sale by using extensive industry knowledge to determine a fair price for both parties.
Business presentation – If engaged by the seller of the business, business brokers can offer considerable advantages in correct presentation.This is because of broad market knowledge and experience in various business aspects that appear attractive to potential buyers.
Getting business buyers – When making a sale, the databases and client networks that brokers build can never be underestimated. Brokers can also help with making business listings on relevant databases.
Disadvantages of using a broker include:
Price – It is a no brainer that Brokers work to earn a living. Most brokers charge a commission of up to 10% on the final sale price which is quite a hefty sum, particularly where large sales are concerned.
Skill levels – Different brokers will always have different academic and professional backgrounds. It is therefore very difficult to tell how good a broker is before being given a job. It is a huge risk considering the commission on the sale.
Interests – Most business brokers tend to work for the seller, so when buying from a broker, its important to remember that his interests and his commission are likely to be one-sided. While it is the brokers job to liaise with buyers and assist them in closing the deal, this does not change the above fact.