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  Thailand Articles

15 Feb 2008 20:31:10 GMT

Do You Need a Business Broker…

or a Buyer’s Representative?

One of the most frequent questions asked by prospective investors, and by both buyers and sellers of businesses, is whether they should hire a business broker. The best answer is probably: “Yes…but.” The "but" is that you should "use" one, not just "hire" one. A business broker can have a very specific and important role in the buying process. The “but” is related to understanding what that role is.

The most obvious, but perhaps most important, service that brokers offer both buyers and sellers is that they’ve been trained in how the process should work, and in some (but, beware, not in all!) cases the broker has had years of experience in negotiating the mine field of property transfer negotiations and closing procedures. They can save you the “cost” of having to learn the many pitfalls of the process through trial-and-error.

In common practice, business brokers (like real estate brokers) almost always represent the seller. The seller pays their commission and even if they are assisting the prospective investor/buyer in the process, they have a fiduciary duty to the seller. This is not to say that they won’t provide the seller with helpful advice and service. It is to say that the broker has a specific set of tasks to accomplish and services to provide, and a specific way of being paid for those services.

More and more we’re finding at Evans Marketing, though, that many investors and buyers (who often have already had successful careers in business in their native countries), have specific and sometimes hard-to-match requirements for a business or investment vehicle. More than needing the basic services offered by all business or real estate brokers, (services like maintaining a database of available inventory of businesses, properties, and real estate for sale, preparing purchase offers and closing documents, holding deposits in escrow, etc. – all important and all offered by our associated entities like & - those investors may opt to hire an experienced local professional as a “buyer’s representative”.

A buyers’ representative works on a fee-for-services basis for a wide range of activities like

  • market research,
  • buyers’ due diligence,
  • price/terms negotiations,
  • lease transfer/renewal negotiations,
  • business audits, and
  • ongoing business management services

: At times an Evans business advisor may be employed on a fee basis to find a business or investment vehicle for a prospective investor (as a buyer’s representative) and another Evans company ends up selling that investor a business or property from which they will earn a broker’s commission from the seller. There is nothing inherently wrong or unethical about such an arrangement so long as the broker clearly discloses to both the buyer and the seller that Evans companies are representing both, and so long as both buyer and seller agree.]

If you are a buyer who does not have the kind of need that would warrant the hiring of a buyer’s representative, should you still use a broker?

There are three things that a business broker can do that are very helpful.

  1. Maintain “Businesses For Sale” Listings

A broker can provide you with access to investment opportunities or businesses-for-sale listings and details about a business or location that you may not discover on your own. This will save you a lot of time, and almost certainly make you aware of investment opportunities or businesses for sale that are not publicly advertised.

  1. Provide A Buffer Between You and The Seller

Brokers can be a conduit to help the prospective buyer interact with the seller. There may be instances where you have to retract or modify an offer and certainly there will be times where you’ll need to negotiate on price or terms. Even after an offer has been made and accepted there will be a potentially strained process of due diligence in which the buyer investigates the inner-workings of the business. Having a professional handle that interaction will likely reduce tension and increase the chances of a successful transaction.

  1. Handle the  Paperwork

A business or real estate purchase, no matter how small, requires a tremendous amount of coordination and document chasing. The data you’ll need from a seller to evaluate a business, the documentation required to close a deal, and the overall paper handling that must be done between buyer/seller and their professional advisors can be astounding. A good broker will be an enormous help putting all of it together.

Finding The Right Broker

A successful relationship with a business broker requires, first, a clear understanding of what a broker can or cannot do.

A business broker can help you make the right business decisions, but they can’t make decisions for you. They can assist you, but ultimately, it is up to you to make the decision. A business broker cannot spend countless unpaid hours searching for the right business for you when you don’t know just what you’re looking for. That’s the role of a business advisor – perhaps of a buyer’s representative. Even a good broker needs a “good” buyer as well as a “good” seller to make a good deal. You need to do the preliminary research to decide, for instance, what kind of business you want.

A broker can’t decide for you what you want to spend on a business, or what you want to ask for your business or property for sale. You need to decide what you want to pay/charge before you ask a broker to help you find a business or a buyer for your business. A business broker cannot conduct the investigation for you (except, again where you have contracted for services from a buyer’s representative). A business broker cannot negotiate the best deal for you. A good broker will certainly attempt to bring all parties to a point of understanding, but if you want the best deal, then you must realize that nobody cares more about your investment than you do. (If you want a negotiator working to get you the best price/terms, consider contracting for a buyer’s representative.)

How do you find the “right” business broker to work with you? Ask:

  • How experienced are they?

  • How many transactions have they been involved with?

  • Have they ever owned their own business?

  • Do they specialize in a particular business or investment type?

  • What references can they provide?

  • How many clients are they working with presently?

  • How many staff work in their office?

A Good Broker is a Service Provider

Don’t just call or email a broker inquiring about a particular listing. The point of your contact is to determine how effectively the broker communicates, and how eager they are for good buyer prospects. If they do not reply to your email or return your call within 24 hours, forget them (unless of course their voice mail indicates they’re out of town). Some brokers say they’re too busy to return buyer emails. Some only reply after they get a second or third inquiry from a buyer.

Help Them To Help You

Once you begin to speak with a broker, and if you’re satisfied with their attitude, their follow-up, and the effectiveness of their communication, arrange to meet them. In some ways you’ll be “selling” them…on you as a serious buyer or seller.

Keep in mind that you want them to keep an eye out for the hottest listings for you, or the best buyers. To accomplish that you must convey several things to them:

  • Show them you’re serious. A business broker wants to be sure that if the right opportunity comes along, you'll be ready to act!

  • Prepare a list of the types of businesses you’re interested in purchasing

  • Present them with your personal financial statement

  • Tell them precisely how much money you have to invest

  • Ask them to present to you businesses for sale that match your interest, your desired location, and you available budget.

  • Let them know you’ll want to hear from them regularly, preferably once a week, to let you know they’re actively looking.

If you’ve found a business on your own that you’re interested in, ask the broker to check it out. See how long it takes for them to give you data or follow up with you. If it’s not their listing, offer to pay for their time (in our case we’d act as a buyer’s representative and would not be paid a commission by the seller).

Business brokers have a role to play. Use them effectively and they can be a solid asset to help you complete the deal. But remember, no matter how effective a broker is, when all is said and done, the task of buying the right business is ultimately in your hands!

About Evans Marketing Co., Ltd.

Ours was the first business consultancy in Pattaya, and followed several years of similar business in Bangkok. We have offices in Bangkok, Jomtien/ Pattaya, and Rayong. Evans’ Managing Director (Charles R.Evans) had almost 20 years’ experience in the USA prior to moving to Thailand. He was a licensed Real Estate Agent, a member in good standing of the Realtors Association, and a Certified Business Counselor. He had a long-standing contract to provide marketing counsel and services to Exxon/Esso through his US-based Business Consultancy prior to moving to Thailand. He is the immediate Past President of the Thaksin Rotary Club.


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