Tweet

Buying a Business and Using the Right Professionals

Guest post by: Steve Skrlac

Article Overview: A major misconception in the marketplace from many buyers is that buying a business is a similar process to purchasing real estate. This is not an accurate assessment though. One of the key aspects to purchasing a company is to do a thorough evaluation of the opportunity and to properly evaluate the business for sale by using professional advisors.

Buying a Business and Using the Right Professionals

A major misconception in the marketplace from many buyers is that buying a business is a similar process to purchasing real estate. This is not an accurate assessment though. One of the key aspects to purchasing a company is to do a thorough evaluation of the opportunity and to properly evaluate the business for sale by using professional advisors. This article will focus on some of the key professionals you may need to rely on in a business purchase and what their role might be.

Business Brokers

A business broker is a professional engaged in the purchase & sale of businesses – usually smaller businesses valued from a few million dollars and under. Essentially, they help sellers to sell and buyers to buy. An important key to working with a business broker is to understand their role in the transaction. Many times a broker will list a company for sale and act as the fiduciary to the seller. In other words the seller is their client.

If you find a business listing from a business broker and approach them about it you must be aware where their ‘loyalties’ lie. Right from the outset, before you establish a professional relationship with them, it is safe to assume that you are not a client but the seller is. This means that the broker has a duty to act with honest and ethics to you but not necessarily a fiduciary duty to you. Many business brokers offer what is know as dual-representation which is acting as a fiduciary to both parties. If you agree with this you must understand their obligations to you and the seller. The rule on dual or multiple-representation vary from state to state and province to province. In many US states, and all Canadian provinces, “business brokers” are licensed by the professional real estate organizations.

Lawyers

A lawyer is a critical member of your team when you decide to purchase a business. Too often, buyers wait until the very end of the process to engage the services of an attorney and this is a mistake. To be prudent, you should have your lawyer review your agency relationship with the broker or brokerage you choose to deal with and certainly review any LOI or conditional purchase agreement before you sign it.

Buying a business can be a legal tangle involving complicated deal points, representation & warranties and complex jargon so your lawyer will need to help you know your rights and your exposure. For instance, if you are buying a company with existing employees in place there may be potential severance liabilities that flow to you. A reputable business broker should have no problem to work with your lawyer. In fact, the two may need to work in tandem to advise you properly.

You should always work with a lawyer when buying a business. However, don’t ever forget that you are ultimately in charge and that it is your deal. Some lawyers may do such a good job of “protecting” their clients by eliminating all business risks that a deal is not done. There is no such thing as a business without risk!



Accountants, Tax Advisors and Business Valuators

Your accountant is an important person on your team when you invest in a business for sale. An accountant can assist in many aspects of the deal such as: should you buy assets or shares, what is the tax exposure for you, determining a fair business valuation, helping with due diligence, and more.

They key take-away from this section is that while you should always use an accountant (early in the process) when buying a company, not all accountants are created equal. Realize that some are tax experts while others have completes a course of study on business valuation – two very different skill-sets. Get references and certainly ask your lawyer or business intermediary if they can refer someone with relevant deal exposure.



Other Consultants

You may find that buying a gas station will require a significant environment study done so you may need to find a certified environmental consultant. If you are considering a heavy equipment dealer business you may need the services of a machinery appraiser. A business with some real estate assets involved may need a property appraiser. The point is that every business sale is unique. Don’t rely on your own insight if you are not an expert in the field and certainly don’t merely rely on information provided by the seller whose motivation is in selling a business. Be a skeptic and get the third party assessments done. It may be slightly more costly at the outset but could save significant dollars lost.

Related Articles
  Market First, Sell Second to Increase Sales in 2011
  The 'Being Efficient' Myth In Sales
  The Right Age to Buy Primerica Life Insurance
  Generating Leads through Internet Marketing For Travel Professionals
  The Canadian Business Sales Marketplace
  Some Facts About Buying an Established Small Business
  How To Destroy The Bridge Between Generations - Scoop 44
  Why Do Referral Efforts Fail?
  How to Say Your Price Without Choking
  The Numbers Myth: Why Internet Marketing is NOT a Numbers Game
  Spectator or Sportsman
  Buying a Business FAQs
  Top 12 Qualities of True Business Professionals
  Internet Marketing Tips for Travel Professionals
  5 Reasons Why Professionals Fail
  Blackjack or Roulette?
  Make it Stupid-Easy to Buy
  Business success is all about sales.
  An open letter to my competition
  Lease Equipment

Article Tags: business brokers, buying a business



Related Forum Posts
My entry - 1. The Best Business Books Ever: The 100 Most Influential Business Books You'll Never Have Time to Read - this is a fascinating book about the history of Business theory, and I'd recommend it to anybody. 2. The Big Book of Small Business: You Don't Have to Run Your Business by the Seat of Your Pants, by Tom Gegax. Ditto. 3. PADI: The Business of Diving Book Okay, so this book won't be of use to anyone who doesn't want to start a scuba store, but I did, and this book was of course invaluable to me in reaching that goal.
Check References! - Make sure you always check references before hiring a consultant to help you out! Also make sure that they have experience in your field? If you're a software company have they ever raised $ for software firms before? Professionals should have no problem giving a list of references that you can call on.
Exclusive: Interview with Results - Hi Forum Members, I'm helping start up a Business Coaching and Consulting company here in Toronto, Ontario, Canada (a Subsidiary of RSC Business in Los Angeles). As a Research and Development Intern I am required to practice my listening and interview skills by surveying Small and Medium Businesses on thier Business. This Survey is designed by RSC Business to also assist the Business being interviewed more insight into their own business. I am looking to interview about 30 businesses across North America over the span of 3 months. At the end of these interviews I will be publishing a report of the results and they will be made available for free to the Interviewees. The Report data will include responses from a minimum of 100 interviews. I would like to extend this opportunity to members of the Forum. If you would like to have this short 20-30 minute interview conducted on your Business and you reside in North America please send me an email or PM. Please contact me at andy[at]jvprosperity[dot]com to arrange our interview and to get free access to the results when they are published.
Re: Why Some Websites Sell and Others Don’t? - There is myth that if you build websites people will come. It is never through, you need to do a lot of things to make your website to work. You have many models of attracting traffics to your site. PPC Article Marketing SEO Press Release Banner Ads Forum Posting Classified Advertising Media Buying Solo Ads and a lot of more. If you are not doing any of the above your websites will just be one of the millions of the unknown sites in cyber space
Re: HOw to market a B2B consulting company - [quote="zohahunt77":428owzbi]Hi, I was wondering if anyone can tell me the difference between B2B and B2C. I don’t know about b2b marketing but I have done marketing so know things about it. I will suggest you to take online services which will spread your business all over web network. Online marketing is the best way to market any business.[/quote:428owzbi] B2B = Business to Business - You are marketing to other businesses. B2C = Business to Consumer - You are marketing to consumers.


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

How To Improve Your CTA (Call To Action)

10 Steps to a Great Support Team

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.