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The services of a business broker are, typically, enlisted by the seller. From the seller's perspective this is often a real bargain: a professional business broker will weed out the 'tire kickers' to help find the perfect new owner for the business - one that has the right experience, sufficient money and realistic expectations. From the buyer's perspective, however, the business broker might sometimes be regarded as a barrier between their and the owner. The truth is, however, that the broker can be as valuable to a prospective buyer as to the seller.
As a buyer, you might start off by contacting a broker about one type of business, but a broker could advise you and point you in the direction of something that is more suitable to your particular background and needs.
And, if you are right for that particular business, they will ensure that the seller takes you seriously whether it’s a hotel or a manufacturing business. You should, therefore, prepare properly for your first encounter with a broker.
Below, we list some of the questions you can expect them to ask and explain why:
What type of business do you want to purchase? Why? The reason the broker needs to know this is to judge whether you are the right type of individual for that particular type of business. Think of this in terms of your experience and interests.
Always answer honestly and explain your reasons.
Have you looked at other similar businesses? Here, also, the broker is trying to determine whether your interest in the current business is merely a whim, or whether you know exactly what you want.
If you are serious about buying this type of business, you will usually have looked around at similar businesses for sale.
What is your time frame? If you are in too much of a hurry you might easily become prey to your emotions and make the wrong decision.
If you tell the broker that you know what you want, and you are prepared to do the necessary homework to reach your goal, it will create a good impression and improve your likelihood of being on the shortlist of prospective buyers.
What are your expectations for the business? Neither the owner nor the broker would want to get involved in a deal where the buyer has unrealistic expectations about future sales and/or profits. Don't give the impression that you expect to become a billionaire overnight.
Instead ask to study the financial statements of the business concerned and inquire whether the broker is aware of anything that might improve or hamper future growth of the business.
Do you have sufficient funds? Nobody wants to embark on lengthy negotiations with someone only to eventually realize they can't pay for the business, or their money is tied up for the next few years.
Once the broker is confident that you are a good candidate to become the businesses' new owner, you will get an opportunity to visit the business premises. At this stage it is important to realize that all information you are given should be regarded as highly confidential. You will, in fact, have to sign a confidentiality agreement.
During and after the visit you will get the opportunity to ask the broker as many questions as you want. This is the time to learn as much as possible about the business. If something comes up that make you uncomfortable, however, you have the fullest right to walk away.
By that time, you should have a good rapport with the business broker, and he or she is likely to understand your decision and be in a much better position than before to help you find a business that is right for you.
By Bruce Hakutizwi, USA and International Accounts Manager for BusinessesForSale.com, the world’s largest online marketplace for buying and selling small and medium size businesses. Bruce has over 7 years’ experience working within the US business transfer marketplace connecting buyers and sellers.