The buying and selling of online businesses is now such a huge industry that you need professional help to be able to make a profit. Indeed, there are so many different factors that you need to keep in mind that if you don’t hire an experienced and trustworthy Internet broker to guide you, you’re probably going to end up losing money!
A simple Google search for “Internet brokers” can net you so many results that it might be difficult to choose the right one for you. However, if you’re specifically looking to purchase an existing Internet business in order to expand your business portfolio, you should consider getting a buy-side broker.
What is a Buy-Side Broker?
The idea of a buy-side broker is not a new one; it’s a common practice for traditional brokerage firms. When it comes to Internet businesses, however, a buy-side broker is not yet a widespread idea, although more and more online brokerage firms are now beginning to offer this specialized service.
An online buy-side broker is a specific type of Internet business broker that helps a buyer through all the difficult and complicated parts of a sale. In this case, their expertise is focused mainly on online services. You can break down the duties of an online buy-side broker into six categories:
The first step of the buy-side process is for the Internet broker to help their client identify potential online businesses that fall into their realms of interest. Essentially, they will guide their clients into looking for existing Internet companies that they feel will be in the best interest of their clients in terms of acquisition and profit.
There are two ways that a buy-side broker can do this. First, they can do it through direct outreach where the broker will directly contact online business owners who are selling their business to see if they are interested in selling to their client. Second, they can do it through sell-side intermediaries such as auction websites. Most brokers choose the second option since there is a greater chance of finding the potential listed businesses for their clients.
Once potential online businesses have been identified, the next step is the assessment of the business. Generally, the broker will help the client through the process of analyzing the financial and operations records of all these businesses to identify all the assets and the risks of the company. At this stage, a broker can also request additional information from the company on behalf of their client in order to become more knowledgeable about the workings of the business.
The third step is due diligence, and it is closely related to the former step. During this phase of the brokerage process, it is the responsibility of the broker to research as much salient information possible about the company. The broker should be able to identify all the relevant data about the company, particularly regarding the company’s financial information such as assets, real estate, employee status, and liabilities. Generally, there is a due diligence checklist that a broker will use to make sure that they are not missing out on any important information that must be shared with the client.
This is a very critical stage of the brokerage process because this is where a broker will prepare their client by providing as much information as possible. A good broker makes sure that their client is thoroughly prepared to enter the next stage of the brokerage process.
After the broker has given all the necessary information to their client and the client is still interested in purchasing the business, the next step is the negotiation. The broker will first submit a letter of intent (LOI) to the seller on behalf of their client stating the client’s interest in the business. This is also the stage where the seller and the buyer will hammer out all the details of the sale, such as the price and terms.
This is another stage where an experienced broker’s services are invaluable because they will be able to act as a mediator between the two parties. Generally, this is the stage where most tensions can flare up, and a broker can help smooth over any rough patches and ensure that the process goes through as quickly as possible.
There’s no denying that there is much paperwork involved in a transaction such as this, and a broker can help their clients by drafting the sale agreement and preparing execution services should the sale becomes final. They can also help their clients understand any legal terms or principles that might be unclear to them.
Finally, a buy-side broker can help even during the transfer process. They can help coordinate the escrow process (or transfer of money), as well as facilitate the transfer of all the assets from the seller to their client.