People who are looking to purchase a business are generally lumped into an overall category referred to as 'Buyers'. I can tell you from many years experience as a business broker that all Buyers are not created equal. How they approach the task of interfacing with brokers and meeting with sellers can make their search very productive or exceedingly frustrating and inefficient.
Here are some of the Do's and Don'ts to consider:
DO ---
1, Accurately represent your financial capacity and accompany that information with a personal financial statement and a copy of a recent Credit Report. This type of candid disclosure is very much welcomed and appreciated and is information that is going to have to be disclosed at some point anyway. The information allows a knowledgeable broker to know what price range of business is reasonable for your circumstances and it also lets a seller know that you are real.
2. Clearly communicate to brokers the types of businesses that you are NOT interested in so that you can help eliminate category after category. While you might be the rare buyer that knows exactly what type of business that you are looking for, also be aware that too much specificity dramatically reduces the chances of finding such a business unless you are willing to consider relocating.
3. If you have some prior credit, legal or other issues (DUIs, bankruptcy, etc.) and if you are going to need
SBA financing, the first order of business will be to get pre-qualified for SBA financing with a lender who has expertise and experience in making 'business acquisition loans'. I mention this as clearing up some of these issues (assuming that they can be cleared) means going through a cumbersome bureaucratic process and it can easily take 6 to 9 months or more --- and no seller is going to wait for that kind of time period, so take care of those types of issues BEFORE you start your search.
4. You need to be timely and responsive once you are shown one or more businesses so that, whether you are working with a broker or a seller, they know what you are thinking, what you concerns are, etc.
DON'T ---
1. There is a time and a place to negotiate price, and it isn't when you first see the listing or the first day that you get information or view a business. Simply put, no one can have an intelligent opinion on value until they have detailed financial and other information.
2. Do not violate the confidentiality that surrounds virtually all transactions. This means that you should not talk to the owner in front of employees, or talk to his/her competitors or do anything else that would reasonably concern either a broker or seller.
3. Do not misrepresent or exaggerate your resume, skills, background or abilities, because most people can see right through people who play that game and once your credibility is tarnished you are going to be under a major handicap in negotiating to buy a business.
4. Don't do all the talking, Prior to meetings, create lists of intelligent questions that clearly indicate that you have read the information about the business and then ask and listen so that that you avoid coming off as a "know it all" type of person.
5. Don't, unless you have valid reason based upon information discovered during due diligence, continuously attempt to renegotiate price and other issues upon which agreement has already been reached.
About The Author: Steve Fitzgerald is a business broker in the San Diego area assisting business buyers and sellers throughout Southern California. You can reach Steve by phone at 858-320-0474.
Watch for more blog posts / articles from me in the future!
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