… and honestly I’m getting a bit frustrated with business brokers to say the least. Over the past two and half months, we have contacted seven different brokers in [our state] about listings of interest to us. Each time we were made to feel as if we had to jump through hoops to be taken seriously enough for even just the briefest of information. What advice can you give a buyer on dealing with brokers? We’re not doing this to waste anyone’s time.
This is a common experience had by most first time buyers. Having been a broker for ten years, I know that I’ll get flack for this at the next annual conference, but here’s my advice for business buyers looking at buying a small business. Avoid businesses listed by brokers.It’s that simple.First, let me say that business brokers bring tremendous value to the business seller. They do this by letting the owner focus exclusively on managing the company so that the trailing 12 month average numbers are climbing (or at least declining as little as possible in this recession). Any seller who tries to sell his company without a business broker risks having that critical 12 month trailing average take a nose dive which then leads to a drop in valuation and final price.One of the key functions that a broker performs is to screen out the 99 lookie-lous who never get past the window-shopper stage. This often means that some real buyers get thrown out with the bath water as well.
My recommendation is to first learn the process of buying a business through a course or books and find an adviser who has experience with business sales. This could be an accountant or lawyer. What you want is someone who will sit in the background and advise you, when asked. You do not want someone who will try to lead you around by the nose.
Then once you have done your homework on the art of buying a business and found an advisor, go direct to the types of businesses you want to buy. The best way to make contact is with a letter to these companies asking if they know anyone in their industry who is interested in selling.
Why do I recommend this route? Because by the time you have done what I advise, you will know far more about valuations and the business buying process than any owner you are likely to come across.
I will post a list of recommended resources shortly. In the meantime, if you want more information on buying a business subscribe to my free newsletter.
Got a question on how to buy a business or need help with the process? Send me your question. My address is on the About page at top left.
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