- Co-Broker their deals with other Brokers to find a Buyer or a Seller to make the deal happen as soon as possible. This gives the Buyer an advantage of working with one Broker who can select from a larger supply of opportunities for you, the Buyer. For the Seller it means your Business is exposed to every potential Buyer in the market place, even if they have a different Broker. After all, the objective is to sell your Business as quickly as possible and that means exposing it to as many people as possible.
- They understand how Small & Medium size Business works. This usually means they should have experience in owning or operating a Business.
- They support their community and understand how to be part of the business environment.
What you should look for in Buying a Business:
Owning a business can be a daunting prospect. There are no guarantees that you will succeed or be happy. At some point after all of your investigation, analysis, and due diligence is completed, you will still have to make that “leap of faith” necessary to proceed with the purchase of the Business. After taking this “leap of faith”, virtually every Business Owner will tell you they would never go back to being an employee. Here are some items you should check when considering the purchase of a business.
1. How long has the Business been in business?
A Business with a long track record generally means there are good reasons it will continue to operate and be profitable. A good reputation in the area, customer loyalty, people patronizing the Business and using its services.
2. Why is the present Owner selling?
If the current Owner just started the Business 6 months ago, or is 30 years old, and wants to retire, you should investigate. However, keep in mind that after about six years, people tend to get restless or can begin to experience “burn-out”. Sometimes they are just looking for new challenges, so keep in mind why the Seller is selling because it is an important question, and you should get a satisfactory answer.
3. Why Books and Records are Important?
Financial records of the Business are an excellent indicator of how well the business has been doing in past years, and will become the basis for your projections of how you can maintain or improve the Business. Keep in mind most privately owned business accounting systems are not designed to show the business in the best light, but rather minimize the taxes the business Owner will have to pay. An analysis of the individual expenses listed will determine which items may be “discretionary expenses” and are not necessarily required to continue with the Business going forward.
A financial advisor or your Business Broker should be experienced in helping complete this analysis. Keep in mind you are using historical financial records that show what the business has done in the past. What you can do in the future is up to you. There are no guarantees that the past will or can be duplicated or repeated, and there should be reasons or expectations on why you can improve the Business.
4. How to determine if the Seller is reporting all income:
The simple answer is – You can’t! Not reporting income is against the law. You should only consider the income that the Seller can prove to you in your analysis. In the case where the Buyer is using an outside source for financing, the lenders will certainly not count any revenues, which are not fully documented.
5. Can I see myself running this business every day?
Many times Buyers spend too much time analyzing the financial statements, projecting the future and negotiating the deal, and don’t step back and think about whether this is what they really want to do. Buying a business is a major commitment. It is extremely important that you get comfortable with what you will be doing on a day-to-day basis and if you are up to the challenge of owning your own Business. If you feel like it will work, call us and we will help you put it together.