Business Owners Resource Network

February 23, 2009

The First Step in Buying a Business

Filed under: Business Brokers,Business Valuations — alieser @ 3:58 pm

With layoffs and unemployment rates on the rise, many people are considering using their severance package to purchase a business.  Most, however, do not know where to begin the process.  They make an assumption that, similar to home buying, their first step should be a visit to the bank for loan pre-qualification.  In reality, lenders will consider both the buyer’s financial needs and capabilities and the financial strength of the business that they wish to purchase prior to making a loan commitment.  Therefore, most banks will want a buyer to have their business search narrowed to a particular business with an accepted offer on the table before they will qualify the buyer for a loan.


So, how do you begin the process of buying a business?  As a business broker, I meet with many first time buyers who have been searching the internet for businesses for sale, but are so confused by terminology and pricing that they fail to inquire for months or even years.  An initial no-obligation visit with a business broker can clarify a number of issues for a potential buyer, such as the size of business that you should be contemplating based upon your available down payment and income needs, what you should anticipate from a financing prospective, what “cash flow” means, and how “cash flow” is used to determine the value of a business.  This initial meeting will frequently conclude with a potential buyer completing a non-disclosure agreement (NDA) which will then allow the business broker to share information on any particular business listings that meet the buyer’s criteria.  Though business brokers are most often hired by the seller with the seller paying any broker’s fees, brokers typically are only paid when the business is sold.  Therefore, it is in the best interest of the broker and the seller for the broker to assist the often-nervous novice buyer throughout the process so that everyone is comfortable with the transaction, significantly increasing the probability of a successful transaction.


If you are interested in exploring the possibility of buying a business, pick-up the phone and set an appointment with a business broker.  This one hour investment of your time could save you months of “spinning your wheels” and could significantly streamline your road to entrepreneurship.


Anita Lieser, Senior Business Broker


Sunbelt Business Advisors

7101 College Blvd. Suite 1650   Overland Park, KS  66210


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