Is It Possible to Find and/or Hire a Business Broker to Assist a Buyer of a Business?

When considering the acquisition of a business, finding a knowledgeable and experienced professional can significantly enhance your chances of a successful transaction. Here, we will explore several avenues to find a business broker that can assist a buyer of a business, discuss the implications of a broker's compensation model, and highlight the importance of due diligence.

Exploiting the Services of Boutique Mergers and Acquisitions(FA) Firms

For smaller businesses, boutique MA firms can be an excellent alternative to a traditional business broker. These firms specialize in due diligence, deal structures, and post-closing integration. They often have expertise that can be tailored to the specific needs of a buyer. By leveraging the skills of these firms, buyers can gain a competitive edge and ensure a smoother transaction process.

Capitalizing on the Resources of CPA Firms

For those residing in mid-sized cities, CPA firms with MA services can offer comprehensive support. These firms often have established networks and a deep understanding of the local business landscape. By engaging with these firms, potential buyers can access expert advice and guidance, ensuring they make informed decisions.

Outsourcing CFO for Buy-side Assistance

If you're looking for specialized financial expertise, outsourcing a CFO can be a strategic move. In today's dynamic business environment, a well-qualified CFO can steer the financial aspects of a buy-side MA deal with precision. By performing a few simple searches, such as a Google search for 'B2B CFO [Your City]', you can discover a wealth of experienced CFOs who can provide invaluable support.

Understanding the Compensation Model of Business Brokers

It is crucial to understand how business brokers are compensated, as this can influence their approach and motivation. Business brokers are typically compensated by the seller, using a modified "Lehman Formula" where they receive a higher percentage of the deal for the first portion of the sale and a declining percentage for the remaining amount. This compensation model can create a conflict of interest, as sellers and brokers share the same financial interests.

Addressing Concerns About Broker Fees and Splitting Fees

Even if you manage to find a business broker who works on your behalf, the situation can still be complicated. Selling brokers may choose to split the fees, which means that the broker still has an incentive to maximize the deal value for the seller. Additionally, the dynamic nature of the business-sales market can make it challenging to secure business listings. In such markets, brokers may resort to highly aggressive tactics to drive sales.

Emphasizing the Importance of Due Diligence

Due diligence is a critical step in the MA process, yet often gets ignored in the excitement of closing a deal. Clients in my consulting practice frequently want to grow through acquisition, but sometimes they become overly focused on a single opportunity, leading to rushed decisions and lack of thorough analysis. It is vital to ensure that all aspects of the deal are carefully examined, including financial health, legal compliance, and operational efficiency.

Aligning Compensation with Buyer Goals

As a consultant, I avoid any direct compensation tied to the success of a deal to maintain objectivity. Instead, I charge an hourly fee for my services. This method ensures that my advice is unbiased and based on what is best for the client. Similarly, if you engage an MA professional, opt for a fee structure that aligns with your long-term objectives. This will help ensure that the advisor's interests are in sync with your business goals.

Conclusion

The acquisition of a business is a complex process that requires significant expertise and strategic planning. Whether you choose to work with a boutique MA firm, a CPA with MA services, or an outsourced CFO, finding the right professional can significantly improve your chances of success. Understanding the compensation model and the importance of due diligence is crucial to navigating the MA landscape effectively.