Businesses that are “sold by owner” are a little more risky than businesses sold by a business broker. There are a few reasons this is riskier: the seller doesn’t want to spend more money to receive the advice needed; a seller thinks they may be more persuasive than a broker; there may be information the seller doesn’t want to disclose; or a business owner may not want to disclose financial information.
Even though business owners can intentionally misstate their profits, it can also be difficult to read whether a business is truly profitable. You definitely don’t want to buy a business that’s not profitable or find out later that a business is not what the “accounting” reflected. It’s possible you could end up paying more than a business is worth as well.
Using a business broker can save you some of the headaches associated with buying a business. A business broker can provide strategic information regarding market timing, market conditions, market price, financing options, transaction structures, and other relevant information that is critical for both you and the seller. An experienced business broker will help you see what you may not see on your own.
Business brokers have usually established relationships with many professional organizations that aid in the selling of a business. There are a number of skill sets that a professional business broker uses to ensure that the transaction is managed smoothly. Business brokers have skills such as valuation experience, market awareness, financial condition awareness, and use of creative deal structures. Because business brokers operate in the marketplace daily and are up to date with supply and demand, you are at an advantage.
In addition, business brokers can find attractive businesses in which you want to invest. They also have experience with determining the fair market value of a “for sale by owner” business. When the need arises for specialists such as a forensic accountants, valuation experts, or attorneys, the business broker has associates that can assist.
Moreover, business brokers have industry certifications. Certifications are a great way to measure the reliability and trustworthiness of business brokers. The International Association of Business Brokers certifies business brokers and awards the Certified Business Intermediary (CBI) to brokers who have successfully undergone rigorous training and examination. This designation demonstrates their extensive knowledge and experience. When buying any business, a business broker can make or break the deal.
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