Business Brokerage and Buyer Representation

People who are looking to buy a business often contact business brokers to help them conduct a search for a business.

Although business searches are routinely conducted for larger scale transactions (mergers & acquisitions level deals that are several million dollars in value), they are not routinely conducted for smaller business sale transactions. This article will examine some reasons as to why main street business brokers in Canada typically don't conduct searches, some tips to help you find a good business for sale and some ideas assist you increase your chances of buying a viable small business that fits your needs.

Why business brokers (typically) don't do buyer representation
A business brokerage professional will in many cases decline offers from prospective buyers to assist them in their search to find a business to buy. From the perspective of a business intermediary, there are so many business "buyers" in the market relative to sellers that it simply would not be efficient to focus on the buy side representation. The vast, vast majority of the hopeful business buyers that contact a business brokerage will, in fact, never buy a business. Some estimate that as many as 80-90% of people looking for a business will never buy one. So, from the perspective of a broker (or ‘sales representative'), it is simply not feasible to focus on representing buyers.

Another reason why a business broker may not elect to work with buyer on a search is that buyers feel that a business search should be done for "free" and that the commission should naturally be paid by the seller. This is a typical scenario in the real estate field and the same thought process extends to the field of business brokerage. The reality is that a business broker could spend countless hours conducting a business search that can come up without a suitable business for sale.

What recourse does a buyer have then?
A serious investor that is looking for good business for sale listings may feel that they're fighting a losing battle. There are relatively few profitable companies for sale and a competing pool of buyers to contend with. As a business buyer, your only true ‘option' is to be aggressive in your search. Buying a business for sale is a much different process than buying a house. You need to be tenacious and approach it as a serious job.

As a buyer you can:

- Include yourself in as many business broker buyer databases as you can
- Network with accountants or other small business advisors
- Comb the internet and newspapers for business listings
- Spread word of mouth that you are in the market

You may want to consider approaching a new business broker who may not have many listings and would be open to at least considering working on the buyer representation side of the transaction for you.

What else can you do?
If you are looking for a very specific type of business at a fairly large price (over $1 millions or so) you may also think about approaching some business brokers to see if they might be interested in representing you on the buyer side of the transaction on a retainer basis. They will likely charge a monthly fee that is non-refundable should you not find a suitable business. They should also specify the tasks that they will undertake on your behalf for said fee. Again, not all business brokerage professionals may do this function but it may be worthwhile exploring the marketplace to find one that does.

Fundamentally, buying a business is a lot of work. It truly is not for those that get easily discouraged. Be prepared for a process that could last several months and approach it as you would a job - or a serious hobby! Finding the right business to buy can certainly be worth the trouble though if it ends up meeting all of your expectations.