Interviewing Business Brokers by NAABB

By Scott Radin, Owner & Founder of the North American of Business Brokers and A.S. Radin & Associates.

It is very important that you thoroughly Consultation your Business broker before signing an agreement with him or her. FYI – please do not ask for references as part of the Consultation as a good Business broker protects the confidentiality before – during -and after the sale.

10 Recommended Consultation questions to Business brokers…

1. How does the Business broker protect confidentiality and can they demonstrate the confidentiality processes? They should have all written materials including the confidentiality documents to leave with you for review
2. How does the Business broker qualify buyers and can they demonstrate it? They should have all written materials including the confidentiality documents to leave with you for review
3. What types and how many lending sources does the Business broker have that are readily available to finance the buyers? They should have multiple levels of lending sources. They should also have the ability to pre-qualify your Business for financing.
4. Is the Business broker fully trained, certified and supported by a reputable source and can they verify it? This would include a contact person to verify it.
5. Is the Business broker willing to leave you full disclosure materials on their entire process and philosophy? They should have all written materials including the buyer and seller agreements  to leave with you for review
6. How diversified is the Business broker as far as networking affiliations to find qualified buyers for the Businesses for sale. They should be able to list at least a half a dozen affiliations and networking sources – THESE ARE NOT proprietary
7. How many listing does the Business brokers and their agents take. If it is more than 12-15 listings per broker or agent then how could they possibly give your Business for sale the time and resources it needs.
8. Ask the Business broker who they work for – you or the buyer. This should always be YOU unless dual-agency is a requirement (certain Canadian Provinces only)
9. Are the Business brokers willing to co-broker.  if NOT then you are not dealing with a reputable Business broker – you are dealing with GREED.
10. How does the Business broker get paid? At closing – up front – combination – understand your fees before signing anything.

By Scott Radin, Owner & Founder of the North American of Business Brokers and A.S. Radin & Associates.

Importance of Qualifying Business Buyers by NAABB

By Scott Radin, Owner & Founder of the North American of Business Brokers and A.S. Radin & Associates.

Having qualified buyers to purchase your Business is vital to getting to closing. A buyer who is not qualified will only destroy a deal somewhere in the process.  A buyer not qualified has no ability to follow through even after an offer has been accepted.  This is the single greatest “deal killer” among Business owners attempting to sell a Business on their own.

Just because a buyer wants to buy a Business does not mean that they can buy a Business. There are two types of buyers – the qualified buyers and the dream seekers. Unfortunately, with owners selling on their own – the dream seekers do not exit the closet until it’s too late. Qualified buyers are so important.

A buyer should be qualified in a certain way allowing for the real possibility of Business financing either through the owner his or herself or by third party lending. A buyer with 100% cash is rare. A buyer wanting 100% financing is dreaming as there is no such thing as 100% financing on a Business – anyone who tells you that there is 100% financing is a liar!

There are five factors that determine a buyer’s qualification…

1. Relevant Experience
2. Liquid Capital
3. Source of Liquid Capital
4. Credit Standing
5. Motivation

The variables regarding these qualification standards are endless depending on the type of Business and the type of buyer. Business owners selling their Business on their own underestimate the importance of buyer qualification and are frequently left holding an empty transaction where not only did the sale not take place but the confidentiality was not protected – and the Business is now suffering.

Think about it from your own perspective. If you were going to hold a note or mortgage on the Business would you do it for anyone or would you want to feel confident that this person would be able to succeed and make payments on time? Third party lending sources feel the same way so qualification is another key component in a successful transaction.

FAILURE TO QUALIFY BUYERS WILL ALSO RUIN YOUR Business

By Scott Radin, Owner & Founder of the North American of Business Brokers and A.S. Radin & Associates.

The Importance of Financing A Business Sale by NAABB

By Scott Radin, Owner & Founder of the North American of Business Brokers and A.S. Radin & Associates.

A buyer wanting 100% financing is dreaming as there is no such thing as 100% financing on a Business – anyone who tells you that there is 100% financing is a liar!

So it goes without argument that some sort of financing will be needed to close the deal. There are various options for financing that are covered below with the understanding that buyer qualification is the key ingredient to obtaining financing for the buyer. You want to close right and get paid right? The ability to finance a buyer is the make or break point of getting to closing.

Before jumping into the three main financing categories, let us dispel one myth and that is the misconception that the owner HAS TO hold a note or mortgage on the Business to get a deal closed. This is not true and it totally rests with the individual owner’s preference. We will advise that selling a Business with some amount of owner held financing does make it slightly easier to sell. But we always advise owners to speak with an accountant about the pros and cons to holding the loan on their Business.

Three Types of financing…

1. Owner held financing is one option but see the last above paragraph to dispel the myth that an owner has to hold financing. We always advise owners to speak with an accountant about the pros and cons to holding the loan on their Business. There may be some tax benefits to doing it this way.
2. Local bank SBA financing is very difficult for a buyer to secure in the small Business for sale environment. It is also the primary reason why there is the misconception that lender financing is difficult.  But there is a third and viable option – Acquisition financing.
3. SBA Acquisition financing from third party lending sources is the primary lending source used to fund buyers of small Businesses. These sources are specifically in Business for small Business lending. Most Business owners – and Business buyers – do not know of these types of lenders nor do they have the contacts to use them successfully.

By Scott Radin, Owner & Founder of the North American of Business Brokers and A.S. Radin & Associates.

Finding The Perfect Business For Sale by NAABB

By Scott Radin, Owner & Founder of the North American of Business Brokers and A.S. Radin & Associates.

Unfortunately, finding that “perfect Business” is a fairy tale. There is no “perfect Business for sale” – and don’t let Business brokers or sellers tell you that it is the perfect Business for you. That’s why 85% of all Business buyers end up purchasing something other than that Business for sale in which they were originally interested in. All Business buyers have a general idea on what they want or need but these general road maps are littered with potholes and detours. It’s best for you to accept the fact that the “perfect Business” and the Business for sale that you buy will be different.

We are not saying that if you want a Laundromat you will never get a Laundromat – rather we are saying is that the dream Laundromat in your mind will never materialize. A Business for sale will never live up to your expectations because it’s human nature to adjust expectations before they are met. If you are too finicky then we can guarantee that you will still be looking 10 years from now.

We recommend that you look at Businesses for sale in areas where you have been qualified – good Business brokers can help in the qualification – and one that interests you and one that you feel you can make money and grow. Instead of finding your dream Business – develop it from an existing qualified Business. This is where Business brokers can help

General Rules Of Thumb…

• Write your needs and wants
• Determine if you want employees
• Determine how many hours per week you want to work
• Determine how much you want to make from the Business per year
• Determine areas where you have extensive experience
• Determine if you want to manage or have a manager in place
• Do you want a “cash” type Business
• Do you want a strictly invoice – check type of Business

By Scott Radin, Owner & Founder of the North American of Business Brokers and A.S. Radin & Associates.

How To Buy A Business by NAABB

By Scott Radin, Owner & Founder of the North American of Business Brokers and A.S. Radin & Associates.

How to buy a business starts with being Qualified – unless you have 100% cash to buy a Business, you will need either seller financing or lender financing. If financing is needed at all then the general rule of thumb to follow is that you will need relevant experience in that type of Business (or self-ownership), have at least 20% cash of the overall asking price to place down and you have good to great credit (credit score of 650 or up).

To determine the price of a Business you can afford – take the amount of cash you have now to place as a deposit then multiply by 5 times that. This will be the maximum you can spend on a Business.

To determine relevant experience – draw up a professional resume on yourself for the last 3- 10 years or more. A lender will want to see this – but now consider any field where you have at least 3 years experience in the last 10 years may apply (3 of the last 5 years is optimum). Relevant means just that – retail is retail whether it is a liquor store or convenience store. If you have extensive and successful self-ownership experience then this may apply as relevant experience in most types of Businesses.

To determine your credit score, use one of the credit reporting services like freecreditreport.com to determine your credit score. NEVER leave a credit report with a broker or seller unless you authorize a release to them – in writing.

Be prepared to work hard on buying a Business while experiencing various pitfalls that may seriously stress you. There is no perfect Business to buy so the work involved in buying a Business is intensive and full of legal issues and agreements.

Business buyers who try to buy without representation and documentation eventually find that they get in too deep into areas where they have no knowledge or experience. At this point the buyer may be in a position to lose deposits as the deal falls apart.

So make sure you have an attorney and accountant on call to assist you.

Next you should be prepared to place reasonable offers. The reality is that full offers would be nice but owners understand that offers may come in for less. The owner will almost always consider all offers – if they are within reason.

Next be prepared to frequently meet with sellers. Most buyers are first time buyers and while they have to be qualified they do experience fears of the unknown. Buyers are encouraged to meet with sellers – frequently more than once – prior to placing an offer.

Last is that you have to be prepared to manage in upwards of 20+ contingencies before and after the offer process. Failure to understand these contingencies will almost surely result in a damaged or failed transaction.

FAILURE TO BE PREPARED COULD RESULT IN A FAILED CLOSING

By Scott Radin, Owner & Founder of the North American of Business Brokers and A.S. Radin & Associates.