Is There Such A Thing As A Buyers Broker Or Representative?

Can business buyers actually get full representation from a broker? With 70% of all California brokers not cooperating with each other it may be a good idea to have someone on your side representing your interests. Is buyer representation a reality? ProIntermediaries discuss this topic on BizBen.

Comments & Feedback From Pro Intermediaries & Pro Advisors On BizBen:

A buyer just asked me this question: "Is there such a thing as a business buyer representative?" I am interested in hiring such a broker or agent to represent me."

My response to him:

While most arrangements have the business broker or agent working for the seller that s who will pay the commission if a deal is completed there are business intermediaries who also, or who exclusively, work on a buyer's behalf.

That means the buyer will pay the fee upon successful completion of a transaction and the broker does not have a fiduciary, that is a legal, relationship with a seller who might be involved in that transaction. The buyer s representative will help to find a suitable business to purchase, and/or will serve as the buyer s agent in negotiations with the seller.

It should be noted that the buyer s agent still has an ethical responsibility to the seller that is, a responsibility of fair dealing. The buyer s agent is paid the agreed-on flat fee on successful conclusion of a deal.


I have chatted with many brokers and agents who say they are coming out with Buyer Representation programs. So fellow BizBen Users - have you represented a buyer for a fee? How did you structure this arrangement? What do you feel about buyer representatives?

It's been my experience that many business brokers tend to mainly sell their own listings or ones which are in house (amongst other brokers) in their brokerage. The reason is because of the need for confidentiality, many listings are not listed or exposed in a system, like that which they sell homes, where the information is readily available to other agents. Many brokers do not cooperate with other brokers for a few reasons, among them, they don't want to share the commission, also they want to control the entire transaction to cut down on liability and to increase efficiency.

In the past, I've been asked by a buyer to find a business, but in all honesty, if the listing isn't mine, there are only so many that's available. Some brokers don't want to share the location of a listing with another broker, because unfortunately out of fear that other brokers will try to solicit their seller while it is under contract.

In California business sales, Buyers representation is not as common as it probably should be. Business sales are very different than other real estate transactions. It is not typical for brokers to cooperate amongst each other. There are many reasons for this lack of cooperation; Client protection issues being on the top of the list but also the nature of business brokerage. For a broker, representing a business owner who expects discretion, it is wise to be suspicious of people or other brokers seeking information. As brokers we are often privileged with very sensitive information. In some cases this information can be damaging if discovered by competitors, vendors or others. This is one situation that makes it difficult for buyers to search for a business. Most brokers do just represent the properties that are their own listings. The current system does not easily lend itself to broker-to-broker cooperation. Of course there are exceptions; relationships are formed among brokers and many exceptions are made. But for the most part buyers are often left to bounce between different agents to look at properties.

The formalities of establishing relationships are streamlined too much, so the Broker-Buyer relationship is often not solidified. As it is frustrating to the buyer who feels underserviced this is also frustrating for the broker who dedicates a lot of time and effort into working with a buyer and then not have inventory available to offer. This is also the primary reason for the requirement of the Non Disclosure Agreements. It is preferable to establish a relationship with a buyer before divulging too much sensitive information regarding someone s business. A buyer should be prepared to qualify him or her self upon first meeting the broker. I recommend that you take the time t sell yourself first and you should be able to find a broker who wants you as a client. Remember, brokers do not like having their time wasted so it is common for some to create a tendency of being short with prospective buyers.

Thank goodness for BizBen and other like publications that do get opportunities out in the open or it would be nearly impossible to buy or sell a business.

Personally, I am primarily a Buyers Broker. However I specialize in the Vended Laundry (Coin) business and my partner and I consider ourselves primarily as Laundry Consultants. We have a system that provides industry education and as part of our service we review and analyze opportunities for our clients. In our case the actual brokerage work we do is more of a byproduct of our consulting work. In some cases we work strictly as a consultant and provide intermediary work as needed. If you are looking at specialty businesses and are not familiar with the operating models, it might be good to consider a consultant/broker that knows the business. If you cannot find someone with sufficient knowledge then you might contact suppliers of products or other owners of like businesses for this advice. If the businesses you are considering are more general or are a business that you are already familiar with you may need to find a broker that you can trust and employ by agreement that provides for the specific type assistance that you require. Keep in mind that while you may ask, it is unlikely that the listing will contribute to these costs.

Buyers definitely benefit from having a broker on their side in most situations; but, there are several factors for the buyer to consider.

The first is: "follow the money." If the buyer engages their own broker in advance, in almost all circumstances the buyer s broker will be compensated by splitting the commission that the seller pays. While the contractual and fiduciary duty of a broker is to work for the best interests of his client, the reality is that the more the buyer pays, the higher will be the commission that the two brokers split.

But, there are solutions. One, is for Buyers to pay their brokers a monthly retainer to pursue every business opportunity of interest to the buyer and to provide advice and counsel to the buyer. Then, upon the sale, the contract should reduce the buyer s cost (and the seller s commission payment) by the amount that would have otherwise been paid to the buyer s broker by the listing broker because the buyer s broker has already been paid. Another, is for the buyer s broker to be paid a commission by the buyer based upon how much lower the final price is from the asking price.

Another factor to consider is that the buyer s broker can t possibly search through all the listings on all the services to find businesses that pique the buyer s interest. The buyer still must do that preliminary search. The brokers job is to obtain the pertinent information from the listing broker, get additional data that the buyer would not necessarily know to ask for, compare and contrast the various opportunities for the buyer, negotiate the deal, and manage the transaction.

Lastly, the buyer should be aware that there is a lot of detail in the due diligence process. This is typically not the responsibility of either broker. But, a buyer s broker who provides the additional service of "due diligence advisor" for an appropriate fee can make the difference between a smooth efficient and effective transaction and "the closing from hell." Ask anyone who has purchased a business and has conducted appropriate due diligence; they will confirm that having an experienced knowledgeable advisor is well worth the investment. Combining the role of "buyer s broker" and "due diligence advisor" expedites the entire process.

Contributor: Transactional Attorney
As an attorney I represent business buyers to make sure that they have independent counsel looking out for their best interests-- not just on legal issues but for the transaction as a whole. I evaluate and negotiate business purchases to ensure the buyer is getting good value, perform due diligence review of the business and sellers, draft letters of intent and purchase agreements, evaluate and negotiate leases and franchise agreements and generally make sure that the transaction moves forward safely and smoothly.

For a business broker the close of the sale is often the last time they'll work with that buyer. But in my practice engaging with a buyer is usually just the start of a longer relationship where I act as counsel on the business' day-to-day legal matters. Being compensated on an hourly basis rather than commission means I'm focused on guiding my client towards the best results (even if that means not doing a particular deal) rather than "closing the sale".

Contributor: Eric - Business Buyer - California
I'd highly recommend thoroughly investigating the "value add" of such brokers before proceeding. I placed a Business Wanted To Buy Posting recently and had a few "cold calls" from brokers who claimed they were paid out of commissions-but didn't explain how they would do anything but dissuade brokers from dealing with me as a buyer, assuming they would "co-broke" in the first place. Better to use lawyers, CPAs and valuation people during due diligence. Perhaps others have had effective arrangements.

Contributor: Due Diligence, Valuations Advisor
The question any buyer, particularly one with little or no experience in self employment, needs to answer is "who is on my side here". Generally, if you have made inquiry of the selling broker and signed a confidentiality agreement, that broker will have locked up both sides of the commission .Retaining another commission salesperson to represent you is not likely to provide the independent viewpoint needed.

The first piece of advice I give to all is "don't fall in love with this ", and be mentally prepared to walk away if necessary. Suggest that any potential buyer find a source for an independent valuation and retain an experienced accountant for due diligence. These services often pay for themselves as the process unfolds.

While buy-side advisory for a business buyer certainly exists, a business buyer should be very suspect of any brokerage firm who seeks an advance fee for buyer representation. At present, there are many firms who craft their NDA s into locking a buyer into excusive representation simply by having them execute their NDA for a business opportunity that their firm typically does not represent. Worse yet, not all businesses are available for co-brokering, oftentimes as the seller s request to protect confidentiality. In such instances, if a buyer has such a broker exclusively conduct what we would hope to be a legitimate search on their behalf, they may inadvertently restrict their own access to the most coveted opportunities as a function of having such an exclusive agreement in place.

If a buyer does engage a buy-side broker, the can prequalify them by having that broker provide their historical success by evidencing their business sale closings via escrow check receipts, escrow settlement statements or the equivalent, and they may request references from unrelated sell-side agents they closed transactions with. Once a buy-side agent is engaged, that agent should conduct the business search, or at a minimum, the buyer should disclose who is representing them upon their initial inquiry, to avoid unnecessary confusion shall they seek to proceed with any given opportunity.

Contributor: Business Appraisals, Valuations Advisor
Yes, but some selling brokers will not cooperate and split the commissions with a buyer s broker. I sold businesses for over 23 years and only cooperated with a buyer s broker twice and the experiences were not good. As the seller s broker and the only broker I was able to talk directly with the buyer and better understand him and help him answer the questions that concerned him. Sometimes I would point out things that he missed or clear up misunderstood comments by him or the seller. I think I helped buyers as much as I helped my sellers, but not all brokers are the same and if you feel you need a broker on your side go for it.

BizBen Blog Contributer Buying a Business

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