Buying Businesses for Sale by Owner: Disadvantages and Precautions

FSBO or business “For Sale by Owner” is a business owner’s attempt to sell his company. Offers like FSBO can easily attract a lot of potential buyers, but you have to be wary and cautious before considering such offers. These opportunities come with significant risks most of the time. Buying an already established business, on the other hand can be a fulfilling decision. The only question is what needs to be done to lessen the risks involved and increase the chances of success in buying a business for sale.

FSBO businesses as challenging opportunities As a general rule, you should never trust everything a seller says about his company. Even inexperienced entrepreneurs and first-time investors are aware of this. Why, then would it be any different in buying a business for sale by owner? Consider the following facts:

First, it is possible that the owner is just attempting to increase the profits of selling his company. Surely, you would not want to shell out a lot of cash for a company that keeps bleeding “red ink”. When you buy a business for sale by owner, the seller might even be unaware of the actual value of that particular FSBO. Most likely, you will be overpaying for the sale transaction. In addition, negotiations are not easy because the value of businesses is oftentimes uncertain. What you will gain or lose generally depends on your negotiating strategy. Fortunately, there is a solution to this problem.

Role of Business Brokers in Buying Businesses for Sale by Owner

A safer way of buying a business for sale by owner is to seek the assistance of a professional business broker. What exactly is the role of business brokers in buying an FSBO business? There are several answers to this question, and as you read on, you will further understand the role of business brokers in buying FSBO businesses. For a very affordable fee, business brokers present a number of advantages in buying a business.

Services Offered by Business Brokers

A broker can help you look for businesses for sale by owners that may draw your interest. A well-experienced broker, most likely has a list of personal contact information of prospective buyers. A tenured broker also possesses the skills that will help you find your ideal FSBO businesses, as well as the ability to determine the suitable price for such transactions. A broker’s knowledge and experience in the field will help you gauge the fairness of a seller’s initial offer

As stated earlier, negotiations can be a challenging phase for entrepreneurs. Professional brokers can greatly help you in this aspect, resulting to a faster and smoother process of purchasing a company.

Furthermore, brokers are experts in dealing with the different types of FSBO companies. Yet, it is still best to look for a local broker who already has remarkable experience in your target industry.

Ask for a Business Broker Certification

A business broker’s certifications in a given industry are essential in making a decision to buy one or more businesses for sale, since a substantial amount of expertise is a must to achieve success in this field. A certification is a good means to measure the trustworthiness and reliability of a broker. The International Association of Business Brokers provides numerous business broker certifications. They can be Merger & Acquisition Master Intermediaries or Certified Business Intermediaries. Obtaining these certifications shows a broker’s experience and knowledge in the field. It is recommended to check if your prospect broker has one of the following certifications or designations:

- Accredited in Business Valuation (ABV)

- Certified Business Appraiser (CBA)

- Certified Valuation Analyst (CVA)

- Accredited Senior Appraiser in Business Valuation (ASA-BV)

While business valuation is very important before you buy businesses for sale by owner, the same thing applies in finding a trustworthy and experienced business broker.

Finding a reliable and competent business broker can significantly affect your attempt to buy FSBO businesses. You need to do a thorough background check on the references and experiences of your prospect broker. Keeping all these in mind, it is a lucrative and rewarding decision to purchase a FSBO business as long as you have the support of a competent broker.