The Deeper Significance of a Representation Agreement

Representation agreements are very common when it comes to selling a business. In order to sell a business using a business broker, a representation agreement is usually required. In this article, we will explore this essential agreement and why it is so critical.

Signing a representation agreement legally authorizes the sale of a business. The fact is that signing a listing agreement serves to represent the end of ownership, which for many business owners, means heading into new territory. Quite often owning a business is more than “owning a business,” as the business represents a dream and often a lifestyle.

Walking away from the dream or lifestyle represents a significant change.  It is not uncommon for many business owners to have started a business from “scratch,” and it is also only human to feel at least somewhat attached to the creation. Phrased another way, walking away from a business that one has worked on and cared for is often easier said than done. Businesses become integrated into the lives of their owners in a myriad of ways. Walking away is usually easier in theory than in practice.

Now, on the flipside of the coin, a signed representation agreement is a totally different animal for buyers. It represents the beginning of a dream. The lure of owning a business may come from a desire to achieve greater personal and financial independence, a sense of pride in ownership and control and in building something, a desire to always be an owner or a combination of these. Buyers see the business as the next phase of their lives whereas sellers see the business as the past.

The representation agreement may seem simple enough, but what it represents is an important bridge between the seller and buyer. It is the job of the business broker to understand and consider the situation of both the seller and the buyer respectively and, in the process, work closely with both parties.

The lives of both the buyer and the seller will change greatly once the sale is completed, but in radically different ways. No one understands this simple, but very important fact, better and with more clarity than a business broker.