Do Buyers Need Brokers?
Yes, No, Maybe So?
In business brokerage, the attention of most brokers is directed towards sellers. They want listings and most brokers see buyers as an evil but necessary part of consummating a transaction. Why? With a listing, you have the most control over a transaction, and you have a contract guaranteeing your payment upon success. With a buyer, you’re stuck hoping another broker will cooperate with you and hope like hell you don’t have to ask your client to pay a hefty commission.
So, do buyers need brokers? The short answer: no.
But you should have a team and at the very least, a plan. And by plan, I don’t mean scrolling BizBuySell until 2am waiting for a 100% seller-financed deal to pop up.
Buyers - here’s what you should have at the ready:
A financial statement
Your tax returns
A lawyer experienced in business acquisitions
Those are the easy ones. But what requires a little more mental gymnastics are the who, what, why, and how.
Who: Who is going to run the business? Are you looking for a business with management in place, or do you want to run the show on the daily? What level of time/energy commitment are you able to give at this point in your life. Lifestyle considerations also come into play here. What do you want your life to look and feel like and how does “X” business fit into that? Seriously, this is important stuff that pays to think about BEFORE you buy a business.
What: What type of business do you want? Ok, I’ve heard it a million times - if you’re not a restaurant guy/gal you have no business buying a restaurant. Sometimes yes. Sometimes no. Go ahead and insert any industry into that old trope. I don’t believe things are that black and white but it’s wise to pick an industry that you have some connection or experience in. That’ll give the seller, landlord, and lender much more confidence in your ability to pull this off - especially if you’re a first-timer.
Why: Why the heck do you want to buy a business anyway? For a lot of people, this answer is something like, “I’ve always wanted to own my own ____________.” or “I’m tired of my corporate job”. It doesn’t have to be deep, but make sure you can articulate that so your friends and family don’t think you’ve lost your mind. A strong “why” will also help you get through the slog of buying the business and the ability to withstand your loss of corporate benefits, a regular paycheck, and your sanity for example.😂Kidding, kidding…
How: Ok, you’ve decided to buy a business, now what? You’ve gotten your finances in order, spoken to your attorney, accountant, and/or advisors and you’re ready like yesterday. Great!
And now we’re back to the original question - should you use a broker? I’d argue against it if you’ve gotten all of your financial, lifestyle, and legal ducks in a row.
I’ve often seen doors slammed in the face of buyers who are represented by brokers (now, that’s a whole other story - read here). Brokers are a weird bunch that don’t play nicely with others and you don’t want your opportunities artificially limited by this industry quirk.
Sure, there may be an “off-market” listing you may miss out on, but for the most part sites like BizBuySell give you access to most of the listings on the market. Take a spin! Looking at listings is a great way to take the temp of what’s out there and compare it to your criteria and expectations. Once you see something that interests you, click that button and get ready to rumble. Ok, maybe “rumble” isn’t the best word choice there. You’ll be whisked through the broker's process and if you’ve done all your homework and have your team in the wings, you’ll be under contract in no time.
Ok, of course there’s a difference between someone prepared like you, and someone who’s slipping on banana peels trying to buy on the fly. This process can be fruitless for a buyer who doesn’t have the money to buy a business and has wacky expectations of the process and industry. Sure, there are people out there who can tell you “Yes! You can buy a 100% absentee-run business for no money down” but those are mostly internet myths.
