If you own a house and decide it’s time to sell, you have a choice. You can choose to handle the process on your own in which case you would be a For Sale By Owner (or FSBO) or you can choose to have a real estate agent represent you. If you own a business or are a potential buyer of a business you can choose to handle the transaction on your own or you can choose to have an agent or Business Broker represent you.
If you choose to have a Business Broker represent you, it’s worthwhile understanding that some Business Brokers belong to associations and these associations have a code of ethics. The International Business Brokers Association (IBBA) is an international association that brings together business brokers from many countries. At last count, there were approximately 28 countries in the IBBA.
The IBBA has a code of ethics and this includes the following articles.
Article 1 – Broker is charged with being knowledgeable with trends affecting business opportunities.
Article 2 – Broker must protect public against fraud, misrepresentation or unethical behavior.
Article 6 – Broker represents interest of their client but it is incumbent upon the broker to deal fairly to other party or parties involved.
In addition to the IBBA, there is the American Association of Business Brokers (or ABBA) plus there are many state or regional business broker associations. A few examples include the California Association of Business Brokers (CABB), Texas Association of Business Brokers, New England Business Brokers Association and many others.
The bottom line is that you should have expectations from a business broker or intermediary you using to represent you and your interests. Being a business broker is not normally restricted to just one skill of closing a transaction. Business brokers assist with business valuations, machinery and equipment appraisals, introductions to third party lenders at banks, credit unions or specialized businesses that handle SBA loans, introductions to legal experts or tax and accounting experts and many other professionals.
At the end of the day, a qualified, educated and motivated business broker should add value to the process of buying or selling a business. There are many associations which they can choose to belong and each has their own code of ethics. This should provide great reassurance that your interests come before those of the business broker and it should be your expectation that this is the case.
Selling or buying a business is a complex and involved transaction. The chances of the transaction closing are greatly enhanced when a business broker or an intermediary is involved as the seller and buyer have a lot of professional, personal, financial and emotional items at stake. Make sure the business broker or intermediary reflects your values and adheres to the code of ethics that are part of any association that they belong. In some states, the business broker or intermediary is required to have a license. Make sure that if this is the case, they meet that requirement.