Hiring Brokers or Advisors for the Business Buying Process

The start of the hunt for a business to purchase is a very important time in the process. I would strongly recommend getting help to make your decisions much easier. Business Buying Brokers and Business Advisors are very useful when you are on the hunt and when you find a viable business fitting the criteria model you have made in your prep work before starting the hunt (for more info on preparing yourself to buy a business, see my article entitled Buying a Business- Prepare Yourself).

Does every buyer necessarily need help from a Broker or Business Advisor?

If you have already bought a business before then maybe you don’t need help. Although it wouldn’t hurt to get a second opinion on businesses you are seriously considering purchasing, especially when determining a fair market price. If you have never bought a business before, it really is a good idea. Once you buy the business, a Business Advisor will really come in handy to help you settle into your new venture quicker and with better success. Be smart and do not buy a business and expect to know everything and do everything. Plan on sticking to what you know best and get help with everything else until you either learn it, or permanently hire someone to take over the work. Taking on too much will quickly put your new venture into a hole.

Where do I find these professionals?

I would start with asking other business owners you know if they could recommend someone. If this is not possible, ask attorneys or accountants. I would also recommend doing a strong internet search specifically for the following key words “broker help in buying a business” or “business advisor help in buying a business”. From the search results, look for one in your local area. You can technically hire this kind of help from anywhere as long as you don’t need them to physically look at the businesses with you. Be prepared to get in touch with a few. You really need to feel comfortable with this person. Keep in mind that using a Broker that came directly from a listing is OK, but they are really representing the seller more than anything else. With that said, some of the larger Brokerages will actually assign a Broker to you that is really there to help you out but you need to ask how this works on a case by case basis.

Which one is better to go with?

The answer to this question often comes down to plain experience. Obviously a Broker has experience in Buying/Selling a business so this would always be a good idea. Better yet, a Broker that also has business owning/operations experience would really be ideal as far as Brokers go. If you are looking more long term, then finding a Business Advisor that has a background in business buying and selling is the ultimate way to go.

When should I hire one?

That’s very simple. As soon as you have performed your prep work, you should look for the proper Broker or Advisor to help you out. Services should be used through the due diligence period. They really aren’t needed following that unless you are looking for help with the business after the purchase from an Advisor.

What will they do for me?

Either one can fine tune your business buying criteria from your prep but a Broker is more adept in actually helping you on the hunt or actually performing this service for you. They can also help you search for the right business including soliciting businesses that fit your criteria that are not actually listed as for sale at the time. For the right price, almost any business is for sale so this may be a route you would want to take although it will be a much longer process.

These professional can make sure that a particular business that interests you fits all of your criteria well enough to get more information on it. Remember that you will initially get very little data on the business you are looking at. Once you sign a non-disclosure, you will get additional information and these professionals will really be able to tell you whether to pursue it or not. If that is the next step, they will be a big help in giving you the right questions to ask the Seller/Broker about the business since this information will be limited financial data and an expanded description in most cases.

Their help in determining a fair market price for the business is the next crucial point. This is where you really can’t go wrong with getting help and taking purely personal opinions out of the loop. Before you get all of the company financial history and dig deep into the operations of the business during the due diligence process, you will need to make an offer on the business, which is why this valuation is needed. This offer is made using a “Letter of Intent”, which is a non-binding agreement to pay the offered price if the business passes your “test” of contingencies. A Broker or Advisor can make sure you have a reasonable set of contingency criteria to prove that the business is worth what you are offering. They will assist you in the due diligence process, along with your accountant, to verify that this is the case. Once the business passes muster, the Advisor or Broker has finished their job as far as the purchase is concerned.

How much will it cost?

Well, there are no set prices for this kind of work. Some may work hourly and others on a flat fee with some limitations on length of the contract term or the number of businesses they will look at with you. It shouldn’t surprise you to see prices in the range of $125-$200 an hour or flat rates of $2000 to $4000. Again, if you find a broker directly through a listing, this will be “free” help. You may get lucky and find a gem but you might end up getting what you pay for. This is a big decision you are making here so this help really is necessary and worth the money if you are serious about purchasing a business. If this seems like too much money to make sure you do things right, then maybe you aren’t really ready at this point in time.

One final point about who you choose to help you find the right business and ultimately purchase one. Do yourself a huge favor and do not employ an accountant or attorney as your advisor. Everyone has their place in this process and this is not the one for either of these professions. Although these professionals are needed in the process and should have experience in business buying/selling procedures, the majority are not qualified, nor do they have the time, to be a business advisor to you. If that was the thought process you had, forget about it right now. I promise you it will not be money well spent.

Please keep in mind that any advice you get from a Broker or Advisor is just that: advice. This is your money, time and effort going into the business you want to find and purchase. All final decisions are yours to make.

Being prepared before even starting your hunt is essential. Getting help doing anything you have not done before is just as important.

Hiring Brokers or Advisors for the Business Buying Process - To learn more about this author, visit George J Sierchio's Website.

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