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10 Things to Do to Buy a Business Through a Broker
When Coco talked to two business brokers, Tony Calvacca and Marsha Barnett-King, a few weeks ago they gave her a lot of great content about how to buy and sell businesses using the little known group of professionals called Business Brokers. This list is designed to give you insight into the world of business brokers and how you can purchase and run a business of your own!
Find a business broker.
Look up your local business broker’s association, and give them a call. Ask for referrals.
Understand what you’re getting yourself into.
Chances are, if you’re a first-time buyer, you’ll freak out and run.
Have a clear plan.
Make sure you know what kind of business you want to buy and that you know how to run it (or know someone else who does).
Decide whether or not you want to run the business.
If you want to be more hands-off after your purchase, make sure there is a good enough management team in place. Make sure the employees will stay once the business changes hands.
Don’t be like these buyers.
Don’t be like the many so-called buyers who don’t know what they want, or don’t know what they’re doing. Do your research, and present yourself in a way that shows you know what you’re doing and that you’re a serious buyer.
Decide which market to buy into.
Do you want to buy a main street business or a business in the lower mid-market? Main street businesses are more common, but generate less revenue. Businesses in the lower mid-market bring in more cash, but the up-front costs of buying one are much higher.
Take advantage of the leveraged buyout (LBO).
Professional investors buy companies through LBOs – purchase price financed with a loan on the business assets. Business brokers can make this available to smaller investors if the business is lend-worthy.
There’s money out there for people who want to buy a business. Small banks with aggressive lending tactics, non-bank lenders and other non-traditional lenders will often lend money to a buyer based on the previous cash flow of an existing business (provided the cash flow is strong and consistent). Business brokers know how and where to find this type of lender, so work with them to figure out what your options are. (Also, check out Lendio for other lending options. More to come on that later…)
Check the financials.
Make sure the seller has kept detailed and accurate financial statements.
Get a lawyer.
You’ll need a corporate lawyer with deal experience to write, read and negotiate your contracts.