Business Brokerage .
Steve Skrlac, MBA, CFA
sales representative
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What Business Brokers Won't Assist you With
If you are a business owner or investor, working with a business broker is a good decision to assist you with a business purchase.
It is important to note, however, that there are certain issues that some business brokers won’t or can’t assist you with. In Ontario, Canada most business intermediaries take a dual agency role in the business transaction. That is to say that they represent both the buyer and the seller in the deal. As such, there are certain limitations on what a business brokerage can do to assist either party.
Below is a summary of some of the things business brokers probably won’t be able to help you with if they are acting in a dual agency capacity. Offer Price Determination Assisting with Due Diligence Offering Legal Advice Accounting or Tax Advice Assure You There is No Risk Guarantee That Your Business will be Sold The point of this article is to stress that a professional business intermediary plays a key role in selling businesses. Although a business intermediary may possess certain skill sets, they are not a ‘jack of all trades’ that will wear multiple professional hats. Fundamentally, the role of the intermediary is to facilitate the sale transaction and not over-step their professional boundaries.
A business brokerage professional can act as a sounding board but they should not explicitly give an opinion on the number you should offer or counter-offer with. Many times the business broker knows the though process of the other party and this puts them in a potential conflict of interest. For example, if you are the buyer and are formulating a selling price and the business intermediary knows the price that the seller would settle on, this puts them in a conflict and they should absolutely not advise on offer price amount.
As a buyer of a business venture it is your responsibility to conduct your own due diligence with your own professional advisors. A business broker’s role is not to dig through the seller’s financials to assist the purchaser with their due diligence.
The broker may have some general knowledge of the laws pertaining to their industry but they are not lawyers and should not be relied upon for any sort of legal advice.
Likewise, a business intermediary may have some personal knowledge surrounding accounting or Canadian GAAP issues but they are not accountants and should not be relied upon for this type of advice.
Buying a business for sale requires an entrepreneurial leap of faith. No reputable business broker should tell you that any investment into a company is risk-free or guaranteed.
When you list your business for sale please be aware that there are no guarantees regarding its sale. The reality is that some businesses simply do not sell. While using a business brokerage will certainly help your chances of selling a business, it is not a forgone conclusion. Please be cognizant of this fact.