Most Important Factors to Know When Buying a Business: Don't Use a Broker
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- Опубликовано: 18 окт 2024
- This is video #4 in my series Most Important Factors to Know When Buying a Business.
You know your acquisition criteria, the type of business, and how to approach businesses.
This video walks you through the reasons why I don't use business brokers.
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Roland Frasier is co-founder and principal of three current Inc. Magazine fastest-growing companies and he has founded, scaled, or sold 24 different 7 to 9 figure businesses ranging from consumer products to industrial machine manufacturing companies with adjusted sales ranging from $3 million to $337 million.
Currently growing Scalable.co, DigitalMarketer.com, RivalBrands.com, and Plattr.com while advising over 150 other companies on digitally centric customer acquisition, activation, referral, retention, and revenue strategies and plan implementation.
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Subscribe to Roland Frasier 👉 / @rolandfrasierepic
To learn more about Roland Frasier 👉 msha.ke/roland...
Connect with me on social:
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He is right. I have acquired many deals without using broker and no money down. The deals are out there. Direct mail works great
Thank you for sharing, glad to hear about your success as well.
We acquire tax practices, we have done 19 deals over last 5 years. We own IRA firm, Real estate, and Insurance firms. It is all financial services, great vertical. I had the technique but you have taught me a lot. Thanks
Great take! This is why I left business brokering, the incentives aren’t set up correctly.
So true Ross!
Could you potentially assign your equitable interest/your position in the agreement to buy the business for a fee? For example I get a business under contract to buy for $1,000,000, then assign my interest in the contract to a a buyer . This buyer and I sign an assignment agreement , I would be assigning my position in the contract , with a purchase price of $1,100,000. The difference ($100k) would go to me as an assignment fee.
At closing the buyer will pay 1,100,000. The seller would receive$1,000,000
I would receive $100k as an assignment fee.
I’m certain the answer is “depends”. But just curious if this is currently being done/ a similar thing is being done.
Absolutely Steven!
Hey Roland, appreciate the video. I'm a beginning business intermediary. My question is, since the market for finding businesses is so inefficient as you stated, why not tap into a broker and their network(assuming they're a solid broker) to assist in the transaction.
As a real estate investor too, I totally get the mentality to want to go off market, but a substantial majority of transactions are done through brokers as most people don't have time to drive for dollars, cold call/email owners, creating marketing campaigns, etc.
Hey Chris, brokers are great for people looking to do traditional deals, but we have a lot of folks looking to acquire at best price and use creative financing vs cash or bank loans, so for that in my experience off-market deals offer the best opportunities. There are also creative brokers, and they can be good to chat with and form relationships, but the very purpose of a broker is to provide multiple potential buyers to get the highest price for their client company, so that is different from what we look for in sourcing the best off-market deals.
@@RolandFrasierEPIC I see, thanks for the information. So it seem it's a bit more geared towards the buyer's side. My brokerage typically only represents sellers. What's your take on listing your business with a broker?
@@duffstah1 I think listing with a good broker is a great way to sell for most sellers. I believe that will generally get them the best price for their business and provide them an experienced guide to the process.
@@RolandFrasierEPIC Understood - thank you. How do you feel about where the economy is heading and rates going up? Do you think now is a wise time to buy or a better time to prepare to buy for a large correction?
@@duffstah1 I think there are amazing opportunities all the time and particularly in times of change or economic turmoil. :)
Seems the best route is to have a valuation done to determine market value by a 3rd party, then contact companies where it would be a bolt-on product. I will be selling my company that makes plastic products out of sheet plastic, so approaching plastic distributor suppliers with a CNC router is the next step.
I'm in healthcare and so many deals go bad because I want their patient census to grow my ancillary companies but the businesses I want to acquire are such huge losses ran by owner operator. Their valuation is so unrealistic. Could you advise on acquisitions that benefit my other businesses but have huge losses?
Mai, are you looking for companies that actually have losses as opposed to profitable businesses? You should be able to find acquirable businesses that have your patient census numbers that will help you grow your ancillary companies without having to deal with companies that are losing money. Some of the areas to consider, would be media (groups, associations, trade shows, publications, newsletters, memberships, tele-health subscriptions, etc), competitors of your existing businesses, supply and distribution chain companies that supply or distribute, related product and services businesses that are selling to your ideal customer profile prospect, recurring revenue businesses, and intellectual property owners that have IP you could deploy in your or related businesses.
Using a broker has been the single largest issue of any of my deals.
Hey Daniel, sadly most brokers I have worked with over the years have not been very motivated beyond a quick sale. They tend to get in the way of creative financing and just slow the process down generally.
Daniel, you have been using the wrong Broker.
why
Thanks Roland. One question I have is, do I have to license to connect sellers and buyers of businesses together? If so, can't I just position it all as A marketing or consulting fee, for providing the connection?
Wondering about the same thing!
Check your state law with an attorney licensed to practice in your state to be sure because I can’t provide legal advice on that, but there are generally several ways for you to do that without needing a license. You just need to structure it correctly.
A professional business broker does not allow the seller to dictate the sales price. A professional business broker will value the business or have a valuation done and get that business preapproved by several lenders before taking it to the market. If you’re looking for a distressed or discounted business, then yes, networking would be the way to go, are there shady brokers or brand new very hungry absolutely. And yes, telling a business owner that his “$5 million busines” is only worth 1 million is a conversation regularly had by business brokers. If you can’t have that conversation, you have no business being a business broker.
Best way is through M&A accounts, lawyers, consultants! Even LinkedIn?
Roland do you have a list of questions we can ask bizz owners not brokers we don't want to deal with brokers
I do Dean, and they depend on what you are looking for. What types of questions are you looking for here?
Do you have a website or mentorship proccess where I can contact you i bought a job on site as a sole trader uk wouldn't want to do that again I'm reading many m&a books trying to shorten the learning curve I know 1 deal could change my life trusting things will work in my favour eventually and it's a personal procces plus networking ect
@@deanpatton966 Hey Dean, I think the best thing to get you on the right track is for you to go through my free challenge at GetEpicChallenge.com. I run through the full process from opportunity to deciding what to buy, creating your acquisition criteria, sourcing deals, talking with sellers, analyzing deals and funding them, both with traditional tools and also using AI instead. The challenge is free and more informative than many courses costing thousands of dollars. It will give you a great foundation on all the most important parts of M&A.
What about a business for sale with an agent but been on the market for more than 450 days..and the numbers make sense
Definitely do your due diligence
The good news about that is that you should have a motivated seller. The bad news is that brokers can be inattentive and uncreative. Worst thing that can happen is you reach out and it doesn’t happen though so you have nothing to lose by giving it a try. :)
@Roland Frasier How would you approach a broker, if you want to do creative financing, with their listings?
I found a business for sale on a business broker