What Does a Business Broker Do?

by Vanessa Lovie 2nd of April, 2024

Business Broker Working

Business brokers are qualified professionals who assist in the buying and selling of businesses, ranging from small business acquisitions to large company mergers. In Australia, every state mandates that business brokers be licensed, requiring them to comply with the Property Stock and Business Agents Act (PSBA, 2002). Business broking is a rather small feild of professionals with a very unique skillset that they have honed over years of working in business sales.

Business brokers play a crucial role in facilitating transactions, ensuring that both buyers and sellers achieve their goals efficiently and effectively. Most business brokers in Australia have backgrounds in small business, accounting, or real estate. A key trait of a successful business broker is the ability to communicate effectively and guide transactions, which often span several months. Their role is more that of an intermediary between parties rather than a typical sales role.

Whilst business brokers can work with either the seller or buyer, typically, business brokers work with vendor (seller) charging them a commission upon settlement.

Key Responsibilities of a Business Broker

1. Valuation

Business brokers help determine the market value of a business by analyzing financial statements, assets, market conditions, and comparable sales. They generally provide an appraisal or may have the necessary qualifications to provide valuations.

When requested, licensed business valuers can prepare detailed reports to justify the asking price and provide clarity to potential buyers. These reports may be used in court proceedings and are common when multiple owners are involved in a business sale.

2. Marketing

In order to sell a business, business brokers are required to create comprehensive marketing material that includes online advertisements and business memorandums. They utilize various channels such as online marketplaces like Bsale, industry publications, and their own networks to advertise the business for sale.

3. Screening Buyers

Business brokers screen potential buyers to ensure they are financially capable and genuinely interested in buying the business. There are a lot of 'time wasters' in business sales, so a broker's role is to filter out these people and focus on the genuine buyers. They protect the confidentiality of the business by vetting buyers and using non-disclosure agreements (NDAs).

4. Negotiations

This is where the business broker's skills are really tested. Brokers act as intermediaries during negotiations, helping both parties reach a mutually beneficial agreement. This usually involves bringing all the parties together - buyer, seller, accountants, solicitors, and advisors - to reach an agreement.

5. Due Diligence

Business brokers assist in gathering and organizing all necessary documents and information required for due diligence. A buyer will want to review the business before buying, and it is important that the business owner and broker are well prepared for this process. The business broker will often work with accountants, lawyers, and financial advisors to ensure all aspects of the sale are handled professionally.

6. Securing The Deal

The business broker will guide the sale to settlement and transition. They are often on hand to welcome the buyer and hand over the business during the immediate training period.

How are Business Brokers Licensed?

Each state has different licensing requirements, and it tends to be part of real estate licensing, which causes some tension amongst business brokers as their work is quite different.

In Australia, business brokers are typically required to hold a real estate agent's license or a specific business broker's license, depending on the state or territory. Licensing requirements ensure that brokers have the necessary qualifications, adhere to professional standards, and protect the interests of both buyers and sellers.

Here's a breakdown of how business brokers are licensed in different states and territories in Australia, along with relevant links to government websites:

NSW - Real estate agent's license. The licensing authority is NSW Fair Trading.
VIC - Real estate agent's license, regulated by the Consumer VIC.
QLD - Real estate agent's license, regulated by the Office of Fair Trading.
SA - Registered as land agents or sales representatives with CBS.
WA - Real estate agent's license, regulated by the DMIRS.
TAS - Real estate agent's license, regulated by the Property Agents Board.
ACT - Real estate agent's license, regulated by Access Canberra.
NT - Real estate agent's license, regulated by Licensing NT.

What Role Does the AIBB Play?

The Australian Institute of Business Brokers (AIBB) is a professional association in Australia that represents business brokers, aiming to promote their interests, provide professional development, and uphold industry standards and ethics. The AIBB offers training programs, workshops, and certification programs like the Certified Business Broker (CBB) designation to enhance brokers' skills and knowledge.

The AIBB also advocates on behalf of business brokers to government bodies and regulatory agencies, ensuring their interests are represented in policy discussions and legislative processes. Additionally, the AIBB facilitates networking opportunities through conferences, events, and online forums, allowing brokers to share knowledge, discuss industry trends, and build professional relationships.

Meet Successful Business Brokers

We regularly conduct interviews with business brokers in the Bsale eMagazine to learn about their experiences and career developments. They provide advice and information to new business brokers and business owners. Here are some of our most recent interviews:

> Specialisation Pays Off: Brad Potter's Success in Selling Healthcare Related Practices

> Veteran Business Broker Tony Arena Explores the Future of Business Broking

> Ray White Commercial to Embrace Business Sales

> Life as a Business Broker: My Remarkable Journey

How Do I Choose a Business Broker?

With over 400 business brokers on Bsale, it can be a bit daunting to choose the right business broker for your business. We have put together a checklist with 15 questions to help you in the process of choosing a business broker and a guide to choosing a business broker.

Originally published: 22/03/2013. Updated 02/04/2024.

Tags: business brokers selling a business