Selecting a Business Broker to Buy a Business

When you are in the market to buy a business it is important to choose the right business brokers to work with to help you in your quest to find the right business for sale.  Although many “professionals” hold themselves out to be qualified to represent you in the capacity of a business broker, please use some judgment regarding who you work with.

Here are some criteria to consider when deciding to work with a business broker to buy a business:

Are they licensed?
Be weary of business brokers who are not licensed.  In the province of Ontario, an individual must be licensed under the Real Estate and Business Brokers Act, 2002 if they wish to trade in businesses for sale.  There are many “business brokers” who claim to be able to represent you in a transaction but if they are not properly licensed under Ontario law then they are not able to do so, in fact.  Although the common nomenclature is "business broker", a properly licensed individual may either be a "broker" or a "sales representative", to be correct.

Do they focus on businesses for sale?
Oftentimes, a real estate sales representative that normally sells residential homes will take on a listing for a business for sale – even though it is outside of their realm of normal practice or if they are not capable of properly handling the transaction.  Selling a business is a much different transaction than selling a straightforward real estate deal.  It is best to deal with a professional that focuses on selling businesses.

What is their experience?
What is the experience of the business brokers your are considering help you buy a business?  Do they have years of experience in selling businesses?  Do they have relevant industry experience?  What sort of reputation does the brokerage have?  Do they have experience in the area you are looking at (example – they are based in Toronto and you are looking to buy in Hamilton, this might not make the most sense for you).

What is their educational background?
Buying a business is a much different skill set than selling a residential piece of real estate.  Valuing a business is a different process and is usually (much) more involved, the negotiations are usually much more involved and the overall transaction requires a specific knowledge based.  Accordingly, it is advisable to deal with a professional that has acquired a higher level of educational background.

What is their reputation like?
Business brokers can have years of experience, a strong educational background and be fully licensed and yet still have a not so stellar reputation.  If you are looking to buy a business you should consider inquiring about business brokers’ reputation to ensure that you are dealing with someone who has a high level of professional conduct and ethical standards.

Are you on the same wavelength as them?
Buying a business is an important step financially, professionally and personally.  Selecting a business broker must also ‘feel’ right.  It’s important to have a good sense about a professional and make sure that they understand what you are looking for as an investor.  The lines of communication must be clear and the relationship with the business broker you deal with must feel right.

Best of luck in your search to buy a business.  Be patient in the journey and take the time to find the right professional business broker to work with.  You’ll be glad you did.