Buying a business is different from buying anything else. Understanding how business brokers think and operate can help you to be a better buyer. Here are some truths that we operate from:
BayState Business Brokers Blog
Whether buying or selling a business, it is important to understand the role of the business broker you are working with, who they represent, what their obligations are, and where their duties lie.Read More
Buying a business is different than buying a used car. If you act as though it’s the same thing and treat the owner of the business like a used car salesman, you will suffer. That can result in the owner deciding not to sell to you, giving you a worse deal, or not being as helpful to you as he could be after you do buy the business. Here are some important things to keep in mind when you meet with the owner.
The first thing that you need to know is that you have a lot of competition in your search for a business to buy. If the extent of your search for a business to buy is looking at Internet ads, it’s likely that when you find the right business, you won’t be successful buying it. That’s because other buyers will be more prepared to take the steps needed to buy that business. The first piece of advice I would give you is to be prepared to take action when you find the right business to buy. How can you be prepared? Here are my suggestions:
The use of online marketing, by advertising businesses for sale on the Internet, has greatly expanded the marketing of businesses. With the use of search engines, like Google, a buyer located anywhere in the United States or the world can find out about a business for sale. The problem with the Internet is that there is so much information on it that a buyer might not find a business available for sale. Being able to market a business for sale is effective only if buyers can find the business for sale.
We’ve sold a number of franchised businesses. It’s not unusual that the owner lists it with us after having listed it for sale with the franchisor. Maybe some franchisors successfully resell their franchises, but our experience is that this is the exception. If you give it some thought, the reason is apparent. Think about who will actually sell the franchise – probably a local salesperson for the franchisor. They usually get compensated based on total revenues of the franchise in their area. It is not in their best interests to resell an existing franchise. It is hard to find qualified buyers for the franchise. When they have a buyer
who is interested in being a franchisee, they want them to open a new location to increase revenues. If they sell them an existing franchise, they just trade dollars.
It’s not uncommon for a business owner who is considering selling his business, to ask me what percent of businesses we sell. The business owner looks at this figure like a batting average – a measure of how good we are and what the chances are that her business will sell if she lists it with us. Unfortunately, this percentage doesn’t really give that information. The biggest factor that affects this percentage is how selective a business broker is in choosing what businesses to sell, similar to how a baseball player’s batting average goes down the more bad pitches they swing at.
If you have a business that generates a significant six figure income and should sell for a few million dollars, you may question whether you should use a business broker or an m&a advisor to sell the business. Here are some ways you can make the choice: Focus less on what the firm calls itself and more on what types, and sizes, of businesses they sell and how they go about doing so. Because m&a advisors and business brokers are not subject to rigorous licensing requirements, check references and look at training and experience.
The nation's business brokers closed more business-for-sale transactions in 2010 than in 2009, according to data released by the country's largest online business-for-sale marketplace.
This week, we had a quarterly meeting of our co-broker group, BBANE. This group was started late in 2008 by four New England business broker agencies. When it started there were about 50 businesses that the group had available for sale. Today, BBANE has 12 agency members with about 50 individual business brokers selling businesses. BBANE has over 200 businesses for sale.