A business transfer agent could also be called a commercial estate agent. They are agents who are involved and help with the buying and selling of businesses. Their role is very similar to that of an estate agent, however they have expert knowledge of the business market and how to sell these products.
It is essential to use a business transfer agent if you wish to buy or sell a property to guarantee a smooth sale and the best price possible. These agents are able to perform sales on businesses both nationally and internationally, and will have specialist knowledge on markets in these areas.
What does a business transfer agent do?
The agent will work on your behalf to obtain the best price possible or acceptable for you, whether you are selling or buying a business. They will have expert knowledge on the local market, as well as of national and international marketing. They will also have a comprehensive understanding of each category of this market.
If you are selling a business:
- The agent will be responsible for all promotion and marketing that needs to be done. This will include producing a prospectus of the business, and any other items that are included with the sale, and issuing this to all possible buyers. They will be able to get in contact with potential buyers through their database, and thus may already know people who may wish to purchase your business.
- The agent will perform all communication with the clients; as the seller you will not be responsible for any of this.
- The agent will set a price on how much he or she thinks that the business is worth, and how much it should be advertised for. Many factors are taken into consideration in this process (see below) and the outcome must be justifiable.
- They will also deal will all conveyancing, which is the actual process whereby the ownership of the property is transferred from the seller to the buyer.
If you are buying a business:
- The agent will deal with all correspondence and carry out all communication with the owner/buyer of the business, which will include negotiating a price.
- They will obtain all necessary paperwork, and perform a valuation on the business to establish what they believe is an appropriate price.
- The agent will be able to provide access to funds for finance or re-finance if they are needed.
- Again, they will deal with all conveyancing.
Typically the agent will be qualified to deal with the majority of legal issues (see below) however a solicitor will be needed for the actual sale. The agent will usually be able to recommend a solicitor, or they may have one working within their firm.
What will the agent need?
- If you are selling your business then the agent will want to see the stocktaker’s results, copies of any accounts and any relevant VAT returns from the last three years, and details of any assets which are to be included in the sale of the business.
- If you are buying the business, then the agent will request copies of these, and any other relevant paperwork, on your behalf.
How will the agent perform the pricing?
The pricing of the business is one of the most complicated aspects of the agent’s role as many different factors are taken into consideration. Each business will vary greatly and thus different features will manipulate the price in different ways, but the following aspects usually will be taken into consideration:
- Initially the agent will establish whether the business is freehold, leasehold or subject to some kind of licence. This will affect the valuation as the buyer may have to pay extra for a lease after the business is sold if it is currently under a lease that will shortly run out, or they may need to pay to have the lease transferred. The license may also cost a great deal to renew.
- The state of repair that the business is in will also affect the price, as will any extra facilities that are provided.
- The agent will make allowances for loan interest, one off expenses, depreciation and any contributions that the owners make towards the running of the business/work, as these are often not accounted for in the wage costs.
- The agent will also take into consideration equipment and machinery, fixtures and fittings, opening hours, and the range and variety of services and products that the business provides.
- Local and national competition will also affect the price, as will the location of the business.
- The finance available to the prospective buyer will also manipulate the cost that the business will sell for if there is limited interest in it.
What legal and financial guidance will the agent give me?
- If you are buying a business and not its current premises, you need to be able to prove that you have the right to run a business from your property. For this you will have to have planning permission and legal covenants, and if your property is leasehold the agent will require lease clauses, as well as the landlord’s permission to transfer the lease.
- If you are selling your business then you will need to be able to prove to the agent that you own and have the right to sell the goodwill of the business. You may also have to agree not to set up in direct competition with the person who buys your business.
- The agent will also sort out any issues of stock value and, if there are any monies owed to the business, how much these will value.
- The agent will also be responsible for sorting any staff issues. This will include having legal knowledge of whether they will have to be kept on at the business or, if not, issuing redundancy.
What qualifications should I look for?
There are no official qualifications which a business transfer agent must have, and the best judge to use is the length of their experience. However, you should make sure that he or she is accredited by the National Association of Estate Agents (NAEA).
- To become a fellow of this association the agent must possess the NAEA Certificate in Commercial and Business Transfer Agency, must be over 25 and have a minimum of five years experience.
- To become a member of the association, the agent must hold the NAEA Technical Award, be over 21 and have three years experience in the industry.
- To become an associate, the agent must have completed the NAEA Technical Award, but can be under 21 and have less than three years experience.
Not only do these different forms of membership ensure that the agent has specific qualifications and experience, but it also means that they will undertake 12 hours of Continuing Professional Development each year, and abide by the Rules of Conduct and the Code of Practice which this association has.
How much will it cost?
The business transfer agent will take a percentage of what the business sells for. This means they are working on commission, the higher the price the business reaches the greater their cut, therefore they will be motivated to obtain the best price they can for your business. There will be some additional costs whether you are buying or selling a business. Legal fees will always come into the equation; some charge by the hour whereas others will offer a set fee. Make sure you ask your solicitor to clarify before you start proceeding which one it will be. You may also encounter taxation liabilities, accountant fees and the stocktaker’s costs (if stock is being included in the price). If the business is being run from a leasehold premise, then the landlord may also run up some costs.
Where can I look for business transfer agents?
The National Association of Estate Agents’ website offers a comprehensive list of all its members throughout the country. Using this website will also help ensure that the agent you find is accredited by the association, and you will be able to measure their experience and qualifications. If you want to look for businesses that are for sale and the agents who are responsible for selling these then look at the businesses for sale website and the UK business base website. These sites both also advertise business for sale abroad.
What should I ask the agent?
- Have you sold any businesses of this kind before?
- What documents do you need?
- What factors will you take into consideration in the pricing?
- How long do you think it will be until I find a buyer?
- What percentage of the profit will you take as your fee?
- What additional costs will I need to pay?