Did you know that more than 600,000 new small businesses open each year in the United States? Of these, only about 50 percent will survive to the five-year mark.
If you are looking to buy a business, you do not want to have a 50-50 chance of failing. How can you raise those odds?
Turn to a business broker to help you buy an existing business. Read on to know how they can make this purchase easier.
What Does a Business Broker Do?
A business broker helps clients either buy or sell small businesses. Individual brokers may specialize in certain kinds of businesses. Some states require brokers to have a license, while others do not.
There are brokers that work on their own, or you can choose to go with a company of brokers in your area.
You can expect them to be able to guide you through the process of acquisition, submitting paperwork correctly, and dealing with licensing and permits. What they do is similar to that of a real estate agent, but they handle paperwork that is much more complex.
One of the most important tasks they perform is to help you find the right business to purchase. They will perform valuations on businesses to see which ones are worth pursuing and their expertise will be able to narrow down the choices you have depending on what you can afford and what your goals are.
If they successfully arrange and manage a sale or a purchase, a business broker will receive a commission.
Characteristics of a Great Business Broker
When choosing a business broker to help you with the purchase of a small business, there are some key characteristics you need to ensure they possess. The right broker will offer:
The broker you choose has to have experience helping clients successfully buy or sell small businesses. Consistent sales are crucial.
You want a broker who has made an average of 10 sales in a year.
Understanding of Valuation Processes
The right business broker will be able to offer various valuation approaches and will have no difficulties explaining them to you. Keep in mind that an in-depth valuation will usually cost you more, but getting an accurate idea of how much the business is worth is vital.
Most business brokers do not charge upfront fees for transactions. They do not charge hidden fees, either, so the client always knows what the process of purchasing a business will cost.
You can expect valuation fees and other smaller fees, but you will always know about them before the broker performs any action on your behalf. The right broker will explain the scope of their work and what each fee is for.
A reputable and successful broker will be happy to provide references of past clients whom you can contact. Hearing about the experience other buyers had can tell you what you need to know about choosing that particular broker.
Why Buy a Business with a Broker’s Help?
Potential business owners sometimes try to go through the process of acquiring a business on their own and that can be a serious mistake. Here are the reasons to go with a business broker.
Easier Business Selection
One of the crucial benefits of a business broker is their knowledge of the kinds of businesses available for sale. They have contacts that you will likely not have. Brokers can reach out even to businesses that are not listening and inquire about any interest in a possible sale.
Brokers will take a deep dive into the business’s finances and will do the research for you to ensure it is a business worth pursuing. With the high percentage of small businesses that fail, you do not want to take any chances.
When you first reach out to the business in which you are interested, you can choose to do so without revealing your identity. This can help avoid any bias on the seller’s part and can prevent an increase in selling price.
The broker will make the initial contact for you to guarantee it is a viable option.
With a process as complex as acquiring a small business, you need someone on your side offering legal advice. The broker will take care of the paperwork and will assist you in the negotiations.
A broker will have a clear idea of what is possible and what is not when making this purchase, and they will help you avoid pitfalls. If issues arise, they are there to guide you through them.
If you would like to make an initial offer, the broker will provide you with the information you need to make a reasonable one.
Although brokers do not offer financing for clients, they can help you find it. They will be able to find the financing that works best for your goals, your current finances, and the business you want to purchase.
Because of all of the contacts a broker has, it will be easier for them to point you to the right lender. Instead of choosing an unvetted one, you can depend on a lender the broker knows well.
Streamline the Procedure
You do not want to spend a long time going back and forth with the seller. Brokers know how to handle this kind of sale and they will take control of it, moving it along. They will make all of the necessary calls for you and follow up as needed.
Turn to Experts
If you are ready to buy a business, a broker is invaluable. With their expertise and contacts, they will be able to help you find a business worth investing in.
Schedule a business consultation with us today!