In essence, the terms business broker and M & A advisors are describing the same job. The difference between the two comes regarding the values of the companies that they are trying to sell. Business brokers tend to deal with the companies that have a turnover of less than $1 million whereas M & A firms will deal with business that is worth more than this amount.
The type of businesses that they deal with also differs quite considerably. Business brokers will represent businesses that are located near to their office, and this will usually include business such as small convenience stores, repair shops and garden maintenance companies. In most cases, these businesses will be owned by an individual and will only operate out of a single location. Buyers will often be people that have worked in the industry of the business that they are buying but have never owned a business before.
An M & A firm will usually deal with businesses that operate on a national or international scale such as manufacturers and distributors. People that want to buy these businesses may be more interested in the investment opportunities rather than getting involved in the day to day running of the business. They may hire their own managers to look after their interests. Buyers may be individuals, but they are more likely to be companies or private equity firms. They will also have had previous experience in buying and selling businesses as well as managing them. Business that are sold by M & A firms may produce a brand that is already well recognized, and there is usually a lot more potential for expansion.
Business brokers operate in the same way as real estate agents. They will advertise businesses for sale in their local area primarily although interest may come from out the area if the business is advertised online. They will wait for the buyers to come to them rather than actively seeking them out. They do not charge as high a fee as an M & A firm which means that they have to take more work on and as a result, they do not spend as much time on each business, and the work they do will mainly be the promotion of the business through established advertising channels. They often work in specific fields of business, such as Jimmy Pollock, one of the many Vancouver restaurant brokers, and restaurant sales experts or Monique Peters a drug store sale expert.
M & A firms will have good relationships with potential buyers that are looking for a business to invest in. They can approach these buyers with propositions that they are likely to be interested in and this means that they have a high rate of success when selling businesses without the need to spend a lot of money advertising the business.
M & A firms to not tend to take on as many clients as business brokers and therefore they will have more time to spend on promoting each business that they are trying to sell.
Business brokers will take a percentage of the total sale price, but there are usually no upfront costs.
You may have to be a large retainer fee to an M & A firm to cover all the work that they have to do before a sale is made. This can include researching the industry that the business in and making sure that it is ready to be sold. Some firms will also contact potential buyers and manage the whole deal until the sale has been completed. While you should be prepared to pay a large figure you still need to ensure that you are getting good value for money. It is usually a better idea to pay the reta
iner in monthly installments rather than as a lump sum payment.
There will also be a back end fee to pay once the sale has gone through. This will be a percentage of the value of the transaction and will be paid from the proceeds of the sale. Deals under $10 million tend to have a fee of around 7%. The percentage will drop as the value of the property increases with deals above $75 million having a fee of only 2%.
The final decision about which type of service to use will depend on the type of business that you are trying to sell and how much the business is worth. A business broker can handle sales of business that earn less than $500,000 each year, and there will be very few costs associated with using this service. However, if the business is valued at $1 million or higher, then you need the expertise of an M & A firm.
An important thing to remember is that when you have a skilled M & A advisor working on your behalf you are often able to achieve a higher price for the business. This means that even with all the fees that you have to pay, you will probably still be better off.