If you are considering a business broker to help you purchase a business, it is important that you understand exactly what business brokers do, what help they offer, and what you should look for in a business brokerage firm.
A business broker works with you to access your needs and help you through the buying process. In most cases, the business broker's fee is a percentage of the selling price, and is paid once the sale is complete, either by the buyer or the seller. Often, the fee is paid upfront by the seller. In instances where the business is being owner financed, the fee is often part of the loan payment. Business brokers work somewhat like realtors.
Before choosing a business broker, check the broker out with the Better Business Bureau. It is also a good idea to ask the broker for the contact information of people who have used their services to purchase businesses in the past. Follow up and talk with those business owners. If the business broker will not provide you with references, walk away. You should also check to see if the business broker is a licensed real estate broker, or if they are a member of the Association of Business Brokers in their state. Check with the licensing agencies and the associations to see if there have been complaints.
A good business broker will evaluate the businesses, and provide you with financial statements and cash flow statements for the businesses you are considering. While they do not provide financing, they will usually work with you to find financing, or help the seller to owner finance the business in a way that protects both parties. A broker that is working for you will ask you several questions, including why you want to start a business, what your educational background is, what special skills and interests you have, the maximum down payment that you are able to put down, if there is a specific type of business that you are interested in buying, where you would like to be located, and what the minimum income required to meet your living expenses is. Licensed business brokers are committed to providing the potential buyer with full disclosure about the business. If you have a question, ask the broker. Your first question should be, “Why is this business for sale?”
It is important to note that most sellers will not allow the broker to give you detailed financial information about a business until you make an offer. Therefore, it is important to make an offer that is reasonable as soon as you know that you wish to learn more about the business. You can always withdraw your offer if you find that you are no longer interested. The broker should provide you with enough information to make your initial offer.
If you are interested in using a broker to help you locate and purchase a business, it is best to work with a network that includes a large number of brokers. You will be assigned to one broker, but when a business owner contacts the network to sell a business, that offer is available throughout the network, which gives you exposure to more opportunities. When you use a private broker who is not part of a network, you may be limited to the businesses that use that particular broker.
Good business brokers usually prove to be an asset to both the buyer and the seller, saving both parties time and money, by offering advice and consultation, handling negotiations for the sale, answering all questions that either party may have, and walking both parties through the process of buying or selling a business.
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