Business Brokers Know The Ropes

NZ Business, Aug 2005 by Areinz, Richie Lowe

AS GENERAL MANAGER of Affiliated Business Consultants Ltd (ABC) and Chairman of the business brokers division of the Real Estate Institute of New Zealand I am often asked: "What's the difference between a business broker and a real estate agent?"

The answer is, business brokers generally sell an intangible, such as the expected profits or in some cases the losses of a business. Real estate agents sell bricks and mortar.

Put another way, agents sell land and buildings while business brokers usually sell an entity or business activity leasing space within a building.

Business brokers appraise a business, determining whether selling is the right option and recommend terms and conditions for the sale.

A broker can handle all the different aspects of the transaction such as developing a marketing plan, implementing that plan, locating and qualifying potential buyers, negotiating the price and terms of the sale and recommending financial institutions sympathetic to a prospective buyer.

With so many different types of businesses there is a need for a specialist field. There are far more factors to consider in selling a business than in normal real estate transactions. By using a specialist broker the process can be simplified and potential problems avoided.

Accredited business brokers have gone even further within the industry and obtained another level of education by gaining the business broking qualification of the Real Estate Institute. They have completed an in-depth course and have at least 'two years' experience assessing, marketing and selling businesses.

Accredited brokers have the knowledge and experience to be recognised as professionals in business broking. Their training and experience are used to ensure the smooth flow of the business selling and buying process, and they have the proven competence to work successfully with purchasers, accountants, solicitors and buyers.

Usually a business sale involves a lease so solicitors are involved to ensure the purchaser's tenancy is secure.

Due diligence needs to be done to ensure the information provided is correct and this usually involves an accountant who also advises on the viability of a business. ABC Ltd is probably the largest business broking company in Australasia with 47 brokers in Auckland and Christchurch so it's only natural I am frequently asked, "How should I go about selling a business?"

To sell a business we need information and the more comprehensive the better.

Varying sizes and types of businesses are treated differently with the quality of information also differing greatly, so expertise is needed to evaluate and disseminate the information.

Not only do we need financial accounts, a copy of the lease and a list of chattels, plant and equipment, we also need to know as much as possible about the business. Sometimes a business broker ends up knowing more about the structure of the business than an owner who is often too busy running the enterprise to view it dispassionately.

After receiving all the information and analyzing it, the ABC marketing committee recommends a price range.

If this is within the expectation of the owner, we list the business to sell. Promoting and marketing the business is the next step. It is only then that the selling process really begins.

Qualifying prospective buyers is a skill owners selling their own business seldom have.

Calling on the experience of a business broker such as ABC can add tremendous value to the sale of the business with the broker attracting a number of buyers to create a more competitive environment.

The broker can also identify the right buyers who understand the value of each different business.

The process can be very time-consuming but the broker has the skills to ensure people who want to sell their business get the best deal.

A real estate agent normally represents the interests of the vendor and a business broker is no different but a successful business broker works with both buyers and sellers to help them achieve their goals.

ABC business brokers can help a buyer to determine exactly what type of business they are looking for, or what may be suitable for them, based on their criteria and financial situation.

For both sellers and buyers using an ABC business broker means having an experienced, knowledgeable person representing them and having the confidence that the best price and terms have been achieved.

Richie Lowe is General Manager of Affiliated Business Consultants Ltd (ABC) and Chairman of the business brokers division of the Real Estate Institute of New Zealand. Ph (09) 630 1600.