The secrets of a business broker

 

Buying A Business

Owning your own business can be the American Dream

  • Earnings potential limited only by self
  • Rewards tied to performance
  • Independence in decision making
  • Broad range of activities
  • Control of one’s security and future
  • Tax shelter options
  • Estate builder
  • Opportunity to work in a field that you choose
  • Provide jobs for family members
  • Can provide flexible work schedule

Buying a Business

If you are buying a business, there will be many questions that will need to be answered before we begin. What kind of business am I looking for? How much will I put down? What is the "right business" for me?

This section will give you some basic guidelines to help you answer these questions and show you what to expect when buying a business. We will also show you how American Business Brokers will guide you through this exciting process. Please understand that there is no charge to you for this service.

The Initial Meeting with American Business Brokers

Before American Business Brokers can help you find a business there are a few questions you will need to answer.

How much money do I have to put down on this business?
Also how liquid that money is, can be crucial. Generally, we are looking for a minimum of 20% down with finances that can be obtained within 7 business days. If your money is in real estate and not very liquid, you will need to make that money liquid before we start showing you businesses. Be sure to leave enough money in the bank for working capital. A basic financial statement will help us determine your purchase power.

When do I want to buy?
The broker that is assigned to you will need to know if you are going to buy right away or just thinking of it in the future. In order to go through the rest of the process we will need to know that you are ready to make a decision once you find the business you like.

What types of businesses interest me?
As a new business owner you will want to make sure you buy a business that is fun for you. If you are going to work hard, make sure you enjoy what you do.

Confidentiality

The first step in the process to finding you the right business is for you to sign our Confidentiality Agreement. Selling a business must be kept very confidential as it may cause employees of a business to leave, competitors to use it to their advantage, or customers to leave if they find out before the seller introduces them to the new buyer. American Business Brokers has a fiduciary responsibility to our sellers to only show businesses to those buyers that will abide by the confidentiality guidelines.

The Education

We will then take you through an education process to explain pricing, terms, cash flow, the process, what to expect and how to make the right decision.

Show you the Businesses

We will then begin discussing the businesses that match your criteria and begin showing you these businesses.

Viewing the Businesses

Now you are ready to start viewing the businesses we are offering. There are two ways you will do this. Either setting an appointment with the seller to meet face to face or on your own.

Meeting between seller, buyer and American Business Brokers. This is how we will handle most of our meetings. What you are trying to accomplish at this initial meeting is: Do you like the business? What you can do to improve the businesses? Information on the staff and the business.

Viewing the business on your own. American Business Brokers may ask you to view the business on your own. You may go with your spouse or a friend. You will go in as a customer, order something, and just observe the business. If you do this it is very important not to go in "snooping around" the business and asking questions. This could break the confidentiality guidelines. You are only to ask questions once your American Business broker has set up an official meeting with the seller.

Once you find the businesses you are interested in we will begin speaking with the sellers regarding the finances and other company information. Once you narrow your search you will move to the Purchase Offer.

What to Expect

Before we get to the Purchase Offer, we will answer a few questions and speak about pricing.

Am I looking for the perfect business! There is no perfect business. If the business was perfect then most likely the seller would never sell. If you did find a business that was perfect you would be paying a very handsome price for it. Your opportunity as a buyer of a business is to see the weaknesses of your new business and determine how you can make the business better if you don’t see that right away, you probably won’t ever see it.

What about financing?
Many businesses sell with some owners terms, meaning, the seller will finance part of the business. This will usually entail putting 30% to 50% down on the business. If not, then American Business Brokers has many lenders that can work with you to get you financed. Your American Business broker will use their expertise to come up with creative finance terms that will satisfy both buyer and seller.

How does my attorney and accountant come into play?
We suggest that you have an accountant and an attorney. However, they are not in any position to tell you to buy this business or not. The accountant will be looking for the perfect business in the financials and the attorney will be looking for the perfect business in the paperwork. Remember, that the perfect business does not exist. If you need guidance in your decision we suggest a friend who has bought or owns a successful business who knows what they are talking about.

Will the business generate income to pay the debt and leave you enough to make a living?
If not, the business may still be a good takeover candidate.

Price of the Business

So how do you determine the right price to ask for the business? We have a simple formula to help with this.

Imagine a triangle with three equal sides. Each corner has a label. The labels are Price, Terms, and Cash Flow. The triangle represents "The Deal" or the potential purchase. The deal can stand as long as it is standing on two of the three sides. If the price of the business is high, then the seller must be willing to offer good financial terms and must be making good money. If the business is not making good money then it must have a good price and good financial terms. Remember, a good deal has to benefit both buyer and seller.

Finally, are you comfortable with the price?

The Purchase Offer

Now you are ready to make on offer on the business. American Business Brokers has all of the contracts you need to help you with this. You will put in the terms, conditions (if any), and offering price. You will also need to be prepared to attach an earnest money check with the offer, which is a small fraction of the down payment. Your American Business broker will then take the signed offer with the earnest money check to the seller. If the seller signs the offer, you have just bought a business. We will then prepare the closing date and American Business Brokers will guide you on finalizing the process.

The closing usually takes place within 4 to 6 weeks.

It is understandable that you would want to get the business for a good deal, but asking too low and playing the offer back and forth will only kill the process. Eventually the seller will be tired of it and ask us not to allow you to make any more offers. Ask for a price that is fair for both parties.

Please contact us with any questions about buying or selling a business.

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