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What Are the Advantages of Buying a Business for Sale by Owner?

Guest post by: Global BX

Article Overview: There are many existing businesses today that are being put up for sale by their owners. Some prefer the services offered by a business broker. Hiring a business broker can save you a lot of time and effort.

What Are the Advantages of Buying a Business for Sale by Owner?

FSBO or Businesses For Sale By Owner

There are many existing businesses today that are being put up for sale by their owners. Some prefer the services offered by a business broker. Hiring a business broker can save you a lot of time and effort. A business broker is no different than a realtor in the housing industry; they are paid by commission for handling a business transaction. Sellers usually gain a certain advantage in businesses for sale by owner (also known as FSBO as sort of business shorthand) but buyers can get even more if they know what to look for in buying a FSBO business.

Advantages of Buying Businesses for Sale by Owner

If you are interested to buy a business for sale by owner, the following are the benefits you can expect based on the different aspects of FSBO:

Regarding the selling price - FSBO cases generally arise when the seller wants to avoid paying commissions to a business broker, and there is usually a wiggle room in the negotiation phase. Note that actual market value already has a sales commission. Take this for example - ABC Company is offered for sale at $250,000 with a 10 percent commission for the business broker. As such, the seller only sees $225,000 from that sale. While it is unlikely for the buyer to convince the seller to give in at that lowered price, he might actually ask the seller to split the difference. In the end, the buyer may just get lucky with a $12,500 savings, which is not bad at all.

Regarding the equipment - A business for sale by owner often includes equipment and other important tools necessary for operation. It can be a big hassle for the buyer to spend additional money on replacing computers, printers, fixtures, and furniture. Since these items were purchased by the business owner probably at the start of the business years ago, the buyer can ask for lower residual value compared to the rates a business broker might indicate. In an FSBO transaction, the seller will most likely include all equipment in the deal, while the broker will insist that the buyer should pay for the fair-market price of every item included in a business for sale.

Regarding the inventory - FSBO businesses present buyers an opportunity to acquire existing equipment and items in inventory that are far below their current resale value while the owner, meanwhile, is just eager to dispose of them as soon as possible for retirement purposes.

Regarding financing - Very few buyers are financially capable of buying a business outright. If your resources are not enough to buy a business, you will probably have to secure financing assistance. Financial assistance for purchasing a business usually comes from a credit union or from a bank. You may also use your retirement fund, borrow money from your relatives and friends, or look for a suitable business partner or co-investors. In the case of buying small businesses for sale by owner, you won't have to go through the options mentioned above, because the best financial assistance provider you have is the seller of the business. Almost all FSBO businesses involve seller financing, which is usually below the rates existing in the market. The length of term in purchasing a small business for sale by owner is also more agreeable to compared to what a lending institution or a bank usually offers.

Regarding expertise - Business owners have complete knowledge of their company, their clients, and the industry. When they decide to sell their business, they are oftentimes eager to stay and help the buyer learn the process and management of the company. Do not be afraid to ask for advice because there are people who actually love to give it. Of course, who else is a better person to ask regarding an FSBO business than the seller himself, right? As the buyer, the sellers' guidance and advice can truly help you in the process of buying a business for sale by owner.

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Article Tags: business for sale, business for sale by owner, businesses for sale by owner, FSBO, FSBO businesses



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