Buy A Business
The services provided by a professional business broker can be helpful in a variety of ways. These brokers can present you with an impressive selection of different and, in many cases, unique businesses. Without the help of a broker, you may not be able to find the same quality or variety of options. Approximately 90% of buyers end up with a completely different business than they first sought out. Business brokers can offer you a wide assortment of available businesses to examine and consider purchasing.
With extensive knowledge and firsthand experience, business brokers are an excellent source of information regarding small businesses and the business buying process. Business broker’s familiarity with the market allows them to confidently advise you about trends, pricing, and what is happening in your area. If hired, your business broker will handle all of the details surrounding the business sale, doing everything that they can to guide you in the right direction. This includes consulting with other industry professionals who may able to further assist you.
Why should I buy a business rather than start one?
An existing and established business has a proven track record. A large portion of the failure rate that occurs in small businesses occurs in the beginning, start-up phase. The existing business has already demonstrated that there is a need for a certain product or service in their area. Financial records and important information on business operations are available to a buyer. Once a sell has occurred, many sellers will stay and train the new owner, often providing financing, as well. These to details are important features to consider and make a huge different in the transition process. Learning the intricacies and details of the business from someone with firsthand experience is invaluable to a new owner.
How are businesses priced?
In most cases, at the onset, a prospective seller will ask their business broker what he or she thinks the business will sell for. The business broker proceeds to review important and relevant financial information before suggesting a price range regarding the worth of the business. Most sellers have a good idea about the financial worth of their business and this figure is certainly considered. The more cash that is demanded by the seller, the lower the selling price; the smaller the cash requirement of the seller, the higher the selling price.
Many business sales are seller-financed, causing the down payment and terms of sale to be very important. In many cases, the structure of the business sale is more important than the actual selling price of the business. Too many buyers make the mistake of being overly concerned about the full sale price when it is the terms of sale that can make the difference between success and failure. A commonly quoted anecdote that accurately illustrates this point is “if you could buy a business that would provide you with more net profit than you thought possible even after subtracting the debt service to the seller, and you could purchase the business with a very small down payment, would you really care what the full price of the business was?”
What happens when I find a business that I want to buy?
When you locate a business that you are interested in buying, your business broker will do the necessary research to provide you with answers to any questions that may arise. Once your preliminary questions have been answered, the next step is for the broker to prepare an offer based on the price and sale terms that you have deemed appropriate. This offer will be subject to your approval of the actual books and records that support the figures that have been supplied. The purpose of this initial offer is to see if the seller is willing to accept the price and terms that you have outlined. Once the offer is presented to the seller, they have the option to approve it, reject it, or counter it with his or her own proposal. As the buyer, you have the option to accept or reject the counter proposal. If you and the seller cannot come to an agreement on prices or terms, the negotiation efforts are typically terminated.
Do I need an attorney?
When buying a business, it is often advisable to have an attorney review the legal documents. However, it is important that the attorney that you hire is familiar with the business buying process and will handle the paperwork in an efficient and timely manner. If the attorney does not have previous experience in dealing with business sales, you may be paying for the attorney’s education.
Most business brokers have a network of attorneys that are familiar with the business buying process. An experienced attorney can greatly assist you in make sure that all of the details are handled in the correct and proper manner. Business brokers are not qualified to give legal advice. Your attorney will be, and should be, looking after your interests; however, it is important to remember that the seller’s interests must also be considered. If your attorney goes to extremes to protect your interests, the seller’s attorney may, as a result, instruct his or her client not to proceed with the sale. The transaction should be fair and favorable to all parties involved. Remember that your attorney works for you, you have a say in how everything is done and handled.
Have more questions? Please don’t hesitate to ask your business broker any other questions that you may have. When considering the purchase of a business it is better to ask as many questions as possible to ensure that you fully understand the process.