If you own a business and are interested in growth, you may want to find a second business to acquire. But before getting started, spend some time examining the benefits and risks of acquiring a small business and determining which kinds of operations suit your objectives.
One of the most popular ways to find a business is by visiting brokerage sites or business listing sites. Some sites focus on a narrow industry, type of business, or geographic region. Others list a wide range of businesses but allow you to filter the results to find businesses meeting your criteria.
|Spend time examining an assortment of listings, even those that don't seem to be a great fit for your goals. Here's why. By studying a variety of listings, you’ll learn how sellers present their information, and you’ll start to get a feel for the prices and terms that are common for specific kinds of businesses.|
Other sites are tailored to specific kinds of business listings:
- Wesellrestaurants.com: a platform for restaurant transfers
- Franchiseresales.com: a platform for franchise transfers
Still others list businesses that serve a specific region. These include:
- Bizben.com: a platform for businesses in California
- Businessesforsaleinnewyorkcity.com: a platform for businesses in NYC
- Themidwestgrp.com: a platform for businesses in Chicago and the surrounding area
Many other listing sites exist, and as you work through them, you’ll find that listings often appear on multiple platforms.
|Many listing sites offer an alert service that will notify you when a listing meets your criteria. However, some alerts are delayed by as much as 24 hours. You may want to set aside time each day to visit your preferred listing sites rather than (or in addition to) automating your search.|
Can a business broker help me with my search?
Brokers can be helpful, especially when you have a clear idea of the kind of business you want to buy.
Some brokers are buyer's representatives, and they can monitor opportunities coming on the market and alert you when one meets your requirements. They'll do this through a fee-based arrangement, which sometimes includes helping you negotiate offers for businesses.
Not every broker offers this service. Most strictly represent business sellers.
Seller’s representative brokers are also knowledgeable about deals coming on the market, but you should avoid connecting with them to source businesses. Here's why:
- Unless the listing is their own, seller’s representatives have nothing to gain by helping you with your purchase. These brokers are compensated by sellers, not buyers, so few will actively search for a business on your behalf.
- Worse than being ignored by a broker, this move could be detrimental when negotiating the price or terms of a deal. The broker will know of your strong interest in buying a business in that field or market, and they’ll likely know precisely how much you can spend. Their insight into your spending power and eagerness to buy can make negotiations nearly impossible.
Buyer’s representative brokers aren’t necessary for sourcing and acquiring businesses, but they could be a welcome addition to your team. If you’d like to connect with a buyer’s representative, you can find one by clicking the Connect button below:
Smart play: Talk with people in the industry
Listing sites and broker support may be all that you need to find the right business to acquire. But, if you're like many aspiring business buyers, you could spend months, or even years, perusing these sites and finding few options that align with your budget and goals.
Experienced buyers often use another tactic: talking with people who are affiliated with the kinds of businesses they’re interested in buying.
They speak with other owners, vendors, distributors, members of business associations, and customers of the businesses that exist in the market. They recognize that some of the people they encounter may know of an owner who is nearing retirement or has communicated an interest in selling their business long before the business goes up for sale.
Could this approach work for me?
This approach is effective because it benefits you (the buyer) and the seller. Here's how:
You can attain a lower price for the business.
Sellers have the advantage on listing sites because each listing is crafted to attract a lots of interest. By arranging a private deal, you can avoid the competition you’d face and, possibly, arrive at a better deal.
The seller can save on closing costs.
Private deals benefit sellers, too, because they can avoid paying the hefty fees that brokers charge to list, market, and negotiate the sale of their business. Broker fees vary, but many charge a 10-15% commission on the total price of the sale. Others ask for a non-refundable fee or retainer that can range from $10,000 to $50,000, based on the business’s listing price.
The transfer can occur quickly.
Sellers can close the deal more quickly because they won’t need to spend time working through many of the marketing tasks that brokers require. By avoiding tasks like crafting a prospectus and an executive summary of the business, sellers can save weeks of time and get cash in their hands faster.
If you find a lead on a potential business, you can work directly with the business owner (and an attorney and accountant) to make the sale happen. You can read more about the process you’ll follow in our guide, Buying a Business That Isn’t for Sale.
Would you like to start building your acquisition team? Use the search tool at the bottom of your screen to connect with an experienced attorney, accountant, broker, or another professional who can help you source, evaluate, and buy a business.
Log into your owner’s portal for free articles and advice that can help you with every part of the acquisition process. Covering topics from evaluating price to excelling in negotiations, our guides can help you gain the confidence you need to source and acquire a new business.