Buyer Advice if you want to buy a business from a broker
Lucas & Weston Ltd
Buying a business can be a complex and time consuming process. So, to avoid the frustration of wasting time and money, here’s a guide to help you deal with us and the sales process. It’s useful for dealing with other brokers too.
The guide is aimed at individuals/private investors, not trade buyers, although it is relevant to both.
- Be clearly focused.
Know what you're looking for. Have a plan. Focus on your key skills and look for opportunities that can complement these. Sellers and brokers will quickly dismiss you if they think you are a time waster or tyre kicker. The perfect business might not exist, and you may have to compromise on what you are looking for. Do your homework before you go looking.
- Understand the seller's motivation.
This is vital. Why is the business for sale? Don't be afraid to ask this question directly. How committed to selling are they? What will the owner do after the sale? You need answers to these questions in order to consider the proposition properly and find out if a business has any underlying problems that the seller is trying to escape.
- Get enough information / Asking questions.
You need as much information as possible to help you assess the opportunity fairly. However, this needs to be balanced against the owner's need to maintain the confidentiality. Don’t be put off having to fill in a confidentiality agreement or non-disclosure agreement. You won’t get far without one. Ask questions and gather as much insight as you can.
- Have the money.
Don't expect to buy a business without access to funding or cash. You can find and negotiate great deals, but you will need the finances in place if you are to be seen as credible. Don't get offended if you're asked to provide proof of funding ability. The seller will want to make sure you're serious. Work out what your budget is and how you can finance it. Remember, you will probably need to allow for working capital requirements and debt repayments.
- Presenting yourself.
A broker, representing a client will look for three main things from you if you are to be taken credibly: Can you finance a deal? Do you have the knowledge or skill set to run a business? Will you get on with the owner? Update your CV, prepare a personal profile, assemble an acquisition brief and know what you want to achieve.
- Understand the brokers role and how they can help you.
The broker is there to facilitate a deal, not to be obstructive and get in your way. Don’t get upset if asked to provide information about yourself and your finances. You’ll likely have to fill in a confidentiality undertaking/non-disclosure agreement (NDA). These are to protect the seller’s interests.
A broker will be managing the sales process on behalf of the Vendor, and they will be talking with many other interested parties. Don’t be afraid to ask questions and seek guidance on the best way to approach the purchase. Be honest and upfront, and the broker should do all they can to help you.
- Don't contact the seller directly.
Unless you are given the go-ahead by the seller or broker, you should not contact the Vendor directly. This is not to protect the broker’s commission as many mistakenly believe. It is so that you don’t compromise the confidentiality of the seller . Respect this or you won’t get very far in your attempts to purchase.
- Making a decision.
Either way, it is only courteous to let everyone know as soon as you’ve made a decision. Provide feedback to the broker and let them know if a particular business is not for you. They can help you find something more suitable.
- Don't be afraid to make an offer.
Offers can be made subject to contract and due diligence. If you like a business and it ticks your boxes, make an offer - state your interest. You are not obligated if any offer is ‘subject to’. However, make sure you have the finances in place as you’ll will get asked to prove your ability to make a purchase, probably at the outset.