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When buying a business can a broker be used as an agent for the buyer (ie. in real estate). If so, how does h

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Answers (2)
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Chimera Strategies
Founder and Managing Partner
Nassau County, NY

Great question. As a business broker based in NY, I would pay/ expect 5% of the gross fee.

Gary Kane
www.chimerastrategies.com

Nov 15, 2010
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The BAF Group LLC
MD

Mark, as a Business Broker, I am periodically called upon to represent Buyers; however, that is almost exclusively by Corporate Buyers, rather than individuals. The answer to your question is not so much, how does that work, which is what I believe you were asking; but what do you want the Broker to do for you.

In most cases - and I DO NOT AGREE with this philosophy - the majority of Brokers will not share commissions, the way Real Estate Agents do. This means that you are faced with personally paying the Business Broker for deals s/he brokers for you. For routine, Main Street-types of transacitons, it simply is not usually worth it. And remember that this is a Broker telling you this!

You will need an Attorney and an Accountant to finalize any deal and perform due diligence, with or without benefit of a Business Broker. In MOST (but not all) cases, the Business Broker that is acting on behalf of the Buyer brings little more to the table - at least, not enough to justify paying their fee.

That is not ALWAYS the case. But in the majority of times we where have linked up with a Main Street Business Buyer, it is when the Buyer has no idea what s/he wants to buy. That s/he is uncertain even what industry to pursue. Then, we provide consulting services to determine what s/he brings to the table, in terms of background, experience, skills and so forth, that would seem to lend themselves to an acquisition. That is a rarity.

The higher you go up the food chain, (and by that I mean the larger the acquisition,) the more that Broker can be justified for a Buyer. So, as I said in the first part of this response, it is not a black and white situation - it is a matter of what you feel you need from the Broker, as to whether it makes sense for you and whether it is a justifiable expense.

Nov 11, 2010