Most of the buyers we work with begin the process of buying a business without being able to communicate what they want. I realize that buying a business, like anything else, can be an education process. However, the ideal buyers would be able to answer the following fundamental questions.
What Is Your Target?
Break down the question into at least four areas:
- How much capital do you have to invest?
- What basic industries are you interested in?
- What geographical area is acceptable? and
- What skills do you bring to that type of business?
Business brokers want to help you narrow down the businesses you qualify for both financially and experience wise. Although it’s not uncommon for a buyer inquiring about one business to end up buying a different one, still it’s essential for all parties to use a rifle rather than a shotgun approach. As a buyer, if you haven’t thought in terms of what you are looking for, and how your skills might match, you may take a very circuitous route in getting where you really want to go.
Are You Willing To Be Part Of The Process?
Buying a business is not an event, it’s a process. Many steps are involved, and it may take months. Before learning anything about a business being offered, the business broker will require you to sign a confidentiality agreement (or non-disclosure). Sellers are very concerned about negative exposure regarding their business being on the market; the confidentiality agreement requires you to share information about the business with only your personal advisors. Also, to completely qualify a buyer, a basic personal financial statement will be required. Brokers have to assure the seller that the buyer is looking at a business within his/her financial capabilities. If financing is required, be prepared to scrutinized with a microscope by the lender.
Are You Ready, Willing And Able?
Actually the first question, “are you ready”, may be the most important. Brokers are willing to work with buyers who are prepared to analyze a business opportunity and make an offer, or have good reasons not to. Buyers who find fault with every deal they look at, or can not put an offer on the table, will likely not work long with a good broker. Having worked with many buyers over the years, it’s easy to spot the “window shoppers” versus the real buyers.
The point with the questions above is to prepare you as a business buyer as you work with a business broker. Remember, good business brokers are members of The International Business Brokers Association (IBBA) and adhere to rules of conduct; most brokers only represent one side, usually the seller, with fiduciary duty to them. Consider surrounding yourself before you begin your search for a business with an advisory team. A CPA, attorney, and other financial advisors can assist you throughout the due diligence process, and in making a definitive selection. The better prepared you are to answer these questions, the more motivated the business broker will be to assist you in finding the business of your dreams.
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Bradley G. Marlor MBA, CBI is a Managing Partner and Certified Business Intermediary at Utah Business Consultants, a full-service Business Brokerage and Valuation firm.