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Top business broker related questions

We believe selecting the right Business Broker to represent you and your business is as important as the decision to sell. Just as you would hire a professional Real Estate Broker to sell your home or a Stock Broker to sell a stock, it is even more important to hire a Business Broker to sell your business given its immense complexity. We like questions and have compiled the best ones to help you understand the reasons to hire a Business Broker, what to look for and how to qualify them.  Have more questions? Send them our way!
Who regulates Business Brokers to ensure they comply with the law?
The Real Estate Council of Ontario (RECO) is a not-for-profit corporation that is delegated by the Provincial government to administer and enforce the Real Estate and Business Brokers Act, 2002 (REBBA 2002) and associated regulations. In addition, RECO is responsible for education, insurance, and compliance including conducting frequent audits of Business Brokers and Brokerages.

Further, the Ministry of Government and Consumer Services is the branch of government that is ultimately responsible for REBBA 2002 and associated regulations including the oversight of RECO.
Who is legally permitted to sell my business?
In Ontario, Business Brokers and Business Brokerage’s are governed by the Legislative Act of REBBA 2002 (Real Estate and Business Brokers Act, 2002). According to REBBA 2002, the assets of a business, both tangible and intangible, including leasehold interests are defined as Real Estate for the purposes of the Act. REBBA 2002 contains regulations including a Code of Conduct, a Code of Ethics, licensing requirements and the repercussions of not complying with the Act. All individuals operating in Real Estate and Business Brokerage must comply with the Act. This also means anyone acting as a Business Broker who is not licensed is bound to this Act although they may not know it.  

For clarity, what this means is that (notwithstanding certain exceptions), it is a legal requirement that a Business Brokerage be registered with RECO and that the Business Broker possess a Commercial Real Estate License to represent a client in the acquisition or sale of a business’s assets. Of course, Business Brokerage is a specialty service that is far more complex than Commercial Real Estate. It is recommended to engage a professional, licensed, certified and experienced Business Brokerage as they are trained in the disposition of tangible assets and intangible assets (goodwill, company name, phone numbers, website, reputation, etc.), which is not normally associated with Real Property.

The ultimate purpose of the REBBA 2002 Legislative Act is to protect the consumer and provide a remedy should the consumer be a victim of unprofessional, unethical, fraudulent, or negligent behaviour from a Business Broker. This is achieved through a set of regulations, a Code of Conduct and a Code of Ethics to ensure Business Brokers and Real Estate professionals conduct themselves and their businesses in an ethical and professional manner. It also protects consumers and provides a recourse to the client if the Business Broker acts unprofessionally, fraudulently or behaves unethically in real estate and the sale of a business. There are also additional benefits to engaging a licensed Business Broker listed below.
What are the benefits of hiring a registered (licensed) Business Broker?
The most important benefit of engaging a licensed Business Broker is that you are protected by government regulated laws that provide a potential remedy if you become a victim of unprofessional representation. Engaging a licensed Business Broker is a wise decision as it:

• Mandates that a Business Broker be insured against Errors and Omissions.
• Ensures the Business Broker complies with a Code of Conduct to act professionally.
• Ensures the Business Broker acts ethically and places the clients interests first.
• Provides a remedy to the consumer if the Business Broker is negligent.  
• Provides the buyer protection if they provide a deposit to the Business Brokerage.
• Ensures the Business Broker uses a registered trust account to manage client and customer funds.

Additional benefits of a Business Broker are:
• A licensed Business Broker is also a Commercial Real Estate professional. They can legally assist in the negotiation of a lease or assist in the sale of real property in addition to the sale of the business. This can reduce fees and offers a one-stop-shop whereby the consumer remains protected.
• A licensed Business Broker and registered Business Brokerage have significant operating costs, annual dues, continuous education obligations and compliance requirements. It is a significant investment and commitment to be licensed and only undertaken by the most professional and experienced Business Brokers.
• A licensed Business Broker and registered Business Brokerage have a lot to lose. A non-compliant Business Broker can face punitive fines. Fines imposed can be as high as $50,000 for individuals and $100,000 for brokerages and severe breaches of the law can lead to prison terms of up to two years. Additionally, the Broker or Brokerage license can be suspended or revoked preventing them from operating and removing their livelihood.

Bottom line - Professionally licensed Business Brokers think twice about their actions as they have a lot to lose!
How can I qualify the right Business Broker?
We are Business Brokers, but we have also been buyers and sellers of our own companies and have a multi-view perspective on the qualities you should look for when considering an intermediary to represent you during the sale of your business. Here are some of the main considerations.
Licensed & Insured: In Ontario, an arm's length for profit intermediary acting as an agent of the buyer or seller in the acquisition or disposition of assets related to the sale of property or a business must be licensed (See below for our list of who can legally sell your business). That said, there are individuals and even M&A advisory firms that operate outside these licensing requirements and are not insured. Some because they do not know, others because it is too cumbersome to get licensed and difficult to get E&O Insurance. If the broker or advisory firm you consider hiring is not licensed or does not have appropriate E&O Insurance, be cautious as you may not have any recourse if they are negligent and damage your business during the sale process. Additionally, for buyers, this could mean that any deposit they provide is unsecured. Crossbridge Business Brokerage is a registered business brokerage in Ontario licensed to represent both buyer and seller in the sale of assets and real property of a business. The brokerage adheres to strict trust guidelines and random audits to ensure clients are protected and their funds are correctly administered and accounted for. Additionally, Joe is individually registered under the Real Estate Counsel of Ontario and is permitted to intermediate the purchase and sale of a business and its assets including real property. Joe is also insured for Errors and Omissions (E&O Insurance) along with buyer deposit insurance.

Understand Taxation: It is extremely important to understand that the final sale price of a business is not what you get to keep. Taxation has a large impact on what you actually take home. Since the sale of a business could be subject to personal income and capital gains taxes, the tax liability could be significant if not properly addressed early in the process. A highly capable Business Broker will understand finance and taxation to be able to help develop a tax strategy to ensure you take the most home. Waiting until the end of the deal to find out your tax exposure is poor practice and could leave you shocked. At Crossbridge Business Brokers, we understand taxation is critical to a successful sale and a happy client. This is why a tax plan is one of the top 3 action items we focus on the moment we engage a client. Every deal we manage has a comprehensive tax analysis completed by your advisors or our tax partners to ensure the sale proceeds are maximized and we all have a clear understand of what you take home. The importance of taxation cannot be understated.  

Ethics & Honesty: These two qualities may be obvious, but you still need to convince yourself your Business Broker is ethical and honest. To validate ethics, we believe a Business Broker should be accredited with at least one regulatory body or association that governs and monitors their ethical behaviour. To confirm honesty, we suggest that you speak to previous buyer and seller clients of your Business Broker. Crossbridge Business Brokers is governed by not one, but two separate Associations that require us to comply with two separate but similar Code of Ethics for us to maintain our licensing and certification. Secondly, as part of our onboarding process, we provide potential clients the opportunity to speak to our past clients.  We are grateful that we have served exceptional clients over the years and that they are willing to not only validate our performance but provide the perspective of someone who has recently gone through our process. We pride ourselves in our ethical and honest professional service as it is paramount in creating a credible relationship with our clients.

Professional: Your Business Broker should appear and act professionally as they will be a reflection of you and your company when they are in front of buyers. We believe a Business Broker should have corporate ownership experience or at minimum, Executive Level Management experience as these professional qualities cannot be taught and are valuable in understanding your circumstances and enable them to act as a professional ambassador of you and your business. Furthermore, your Broker should be a full-time professional Business Broker where 100% of their daily focus is selling businesses and not someone dabbling part time in business brokerage. At Crossbridge Business Brokers, we are a full-service Business Brokerage, and we focus 100% of our efforts on helping sellers prepare and sell their business to the right buyer.  We have over 30 years of business ownership experience and have been executives at well known Canadian companies. We have been in our client’s shoes and have the expertise and track record to professionally represent our clients. We are also a Commercial Real Estate Brokerage, although we only trade in Real Property if it is part of the sale of a business.

Qualified & Capable: We believe every Business Broker should be a subject matter expert supported by experience, training, and certification. Experience and training demonstrates capability while certification demonstrates they are qualified to represent a buyer or seller in the trade of a business. However, it is important to recognize the two are not the same. A Real Estate Agent may be qualified on paper to sell your business but may not be capable if they have not sold many businesses. Conversely, your accountant may be capable to sell your business as they know the finances intimately but may not be qualified because they are not licensed or certified. Trust the sale of your business to only highly qualified and capable Business Brokers to get the best results. From our team, Joe is a licensed Business Broker and Commercial Real Estate Agent. He is also a Certified Business Intermediary (CBI), a designation certified by the International Business Broker's Association. Joe is also a Certified Mergers & Acquisition Professional certified by Coles College, Kennesaw State University. Bob is a Certified Business Coach with extensive M&A experience. Additionally, Joe and Bob have a combined 70 years of professional corporate experience. These certifications combined with our corporate experience demonstrates our qualifications and capability to sell your business.  

Business Experience: We believe that your Business Broker should know what it's like to be in your shoes and appreciate the value of what you have built. Being able to appreciate sweat equity and knowing how to operate a business is an invaluable experience. Additionally, your representation should be able to demonstrate experience through past deals, current processes, case studies, etc., to earn your confidence and prove they have what it takes to fully achieve your objectives. After a decade of successful deals, we not only have the experience but also a refined process and enough case studies to ensure a successful sale process. Further, we have been buyers and sellers of our own businesses and have been in our client's shoes and appreciate their situation. Having this experience, we know where to find value where others cannot.

Value Confidential Information: Your confidential information and "Secret Sauce" is perhaps the most valuable asset to a buyer as it is the most difficult to reproduce. It is often the piece that differentiates the success of two similar businesses. Giving your confidential information to just anyone could leave your business exposed to loss of employees, customers or vulnerable to potential competitors. At Crossbridge Business Brokers, your confidential information is a top priority and extremely important to us. We have written in-depth on this topic. Click here to learn more about how exactly we handle your confidential information.  

Proven Process: Selling a business is a process, not an event. It is a series of steps that if not handled in the right sequence could have negative impacts to your business or the deal. Your Business Broker should have an impeccable process and be able to demonstrate its proven effectiveness. Do not be afraid to challenge even the smallest of details to ensure their process is fully refined. At Crossbridge Business Brokers, we take pride in our proven 10 stage, 250 step process which we have continually been refining for over a decade. We not only track and manage the steps we are responsible for but manage the activities of all the other advisors and third parties who affect the transaction. Click here to learn more about our detailed process.

Responsive Communication & Engagement: The number one complaint we hear about other Business Brokers is that they do not get back to their clients and are nonresponsive. Your representation should be in regular communication and be able to demonstrate how they will keep you engaged as to what is happening and maintain a tight documentation process to protect your interests. At Crossbridge Business Brokers, we project manage and plan out each deal start to finish. There is no guessing what we will work on from one point to another. Additionally, we have short, but routine weekly meetings with our clients to keep them updated of the progress, follow up on action items and provide meeting minutes after each meeting to generate a solid paper trail for everyone to follow. We are proud that our clients have commented this is an area we excel in.

Subject Matter Expert or Offer a Specialty: Whether it's valuations, machine appraisal or selling dental practices, your Business Broker should have a specialty or be an expert in a specific field. It takes discipline and determination to develop a specialty and is a quality worth seeking.  At Crossbridge Business Brokers, we have been business owners and operators of lower middle market high tech nuclear and robotic automation manufacturing businesses. We have designed and built automation machinery all over the world and have been in hundred of plants across the globe. We have a combined 60 years of experience in automating processes and improving efficiencies in manufacturing operations. As a result, industrial businesses with technical, complex process including trades, machinery and manufacturing are, without a doubt, our specialty.  

Mastermind Support Team: Selling a business requires an abundance of skillsets to sell a business for maximum value. If the Business Broker lacks some of the skills or experience, it is important that they be surrounded by a team of experts able to support them and their client throughout the process. At Crossbridge Business Brokers, we are experts in the acquisition and sale of businesses with a focus on preparation, financial analysis, and taxation to maximize the sale. That said, we are not accountants or lawyers and don’t provide financial or tax advice but rather, rely on our Mastermind Team of advisors in corporate finance, corporate law, taxation, and estate planning. We collaborate with each advisor on a routine basis to provide counsel to our clients or to compliment our client’s counsel and advisors. We have the Mastermind Team with the full suite of services to ensure your business is sold right the first time and for maximum value.
Who needs to be licensed, the Broker or the Brokerage?
In Ontario, both the Business Broker and the Business Brokerage must be registered (licensed) with RECO. This is because both the individual and the Brokerage have certain compliance requirements. Further, any licensed Business Broker must be employed by a registered Brokerage to maintain valid licensing. This ensures the Brokerage is ultimately responsible for the conduct of its employees and Business Brokers and this puts a legal onus on the Brokerage to ensure a high standard of ethics, training and compliance.
What happens if a licensed Business Broker breaks the law?
If a complaint is made to RECO about a Business Broker or if a Business Broker is found to be in violation of the Legislative Act of REBBA 2002 they can be faced with several disciplinary actions depending on the severity. These can be as simple as administrative reprimands to more severe infractions leading to registration (license) suspension or revocation and even disciplinary actions including fines and Provincial Court prosecutions. Fines imposed can be as high as $50,000 for individuals and $100,000 for Brokerages. Court prosecutions can be fines of up to $50,000 and/or prison terms of up to two years. Corporations are subject to fines of up to $250,000.
Why are some Business Brokers operating without a license?
Most simply do not know there is a licensing requirement as it is a very specialized industry.  Some believe it is not a requirement while others defy the act in its entirety. Either way, it is only a matter of time before the consequences catch up with an unlicensed individual or firm.