How to Become a Business Broker

To become a business broker requires a good understanding of the business market. Business brokers typically have a lot of experience and basic business savvy. They buy and sell businesses, acting as agents for clients. Their role is to both advise and to get the best possible deal for their clients.

Education and training

Business brokers usually start their career with either experience as business owners or a business degree. Qualifications aren't legally compulsory, but are a major advantage, providing a range of skills which are vital in business brokerage. A Masters degree is preferable for advancement in this field. The next stage of training is a special course in business brokerage, valuable for training in the concepts and practices of this sometimes difficult and demanding profession.

Because this is a highly specialized line of business, many business brokers undertake ongoing education. This is useful for creating a good current knowledge base and adds qualifications potentials over time.

Licensing

Basic business brokerage usually requires state licensing, but requirements vary considerably, both for state based brokerages and business conducted interstate. In some states, like California, business brokers require a Real Estate license to operate. In most states a form of business brokerage called Mergers and Acquisitions (M&A), which applies to larger businesses, requires a special securities license.

Skills issues

Business brokerage does resemble real estate trading superficially, insofar as it's a buying and selling of businesses instead of properties. The resemblance is somewhat misleading, however, in terms of the broker's role. To buy or sell an operating business requires strong fundamental business skills and talent in these areas:

  • Asset valuations
  • Knowledge of business and commercial law
  • Viability studies
  • Financial projections
  • Market knowledge
  • Negotiations
  • Communications
  • Problem solving
  • Organizational
  • Time management

A business broker acts as as an agent for the client, usually under a binding agreement which may include confidentiality clauses. The business environment is usually highly sensitive to costs and values. The business broker must exercise due diligence in this role, making sure that the business being acquired or sold is accurately assessed at a realistic market value. The business broker acting for a purchaser must also ensure that there are no hidden liabilities and that the business is viable. At M&A level, purchasers may also take on the liabilities of the acquired business, requiring further levels of assessment.

Acting for either purchaser or seller, the business broker must also act as a negotiator regarding the sale. This is one of the most important, and often complex, areas of the broker's role. Terms of sale may require extended negotiations to provide a price acceptable to both parties. In some cases, the buyer may have to consider serious cost issues. Both parties may need to be convinced that the negotiated purchase price is reasonable and viable.

Market knowledge is a particularly important area of skills. To correctly assess a business requires a good understanding of the market environment in which that business operates, and from which its revenue is derived. Experienced business brokers will assess a prospective sale on the basis of its revenue streams as much as its books.