Choosing The Best Business Broker

<p>Buying a business today is an involved and complicated process requiring expertise in many different areas (i.e., legal, accounting, tax, business valuation and due diligence). With thousands of businesses available navigating your way to the right one can be an arduous task.</p>

<p>A <a href="http://www.qbsnet.com">Business Broker</a> can be a very effective tool to identify, locate, screen and value each targeted business and thereafter, in obtaining financing, negotiating the purchase, coordinating the due diligence and supervising the preparation of all transaction documents through the closing.</p>

<p>In the event you as the buyer attempt to purchase a business without the aid of a broker, realize that the listing broker represents the seller who pays his or her commission.  Since most listing brokers will ordinarily not do anything to jeopardize a sale, you cannot rely on the seller's broker to advise you objectively.  Never lose sight of that fact!</p>

<p>For most published listings, the listing broker will "cooperate" and "share" the listing, and the commission, with the broker hired by the buyer.  In this case, it will not cost the buyer any fees or commissions to obtain exclusive representation. </p>

<p>Once you decide to hire a business broker, seek out a <a href="http://www.qbsnet.com">competent professional</a>.  The vast majority are unprofessional and quite dysfunctional when it comes to understanding the transaction, valuing the business and providing customer service and support. Furthermore, most business brokers have never owned or even purchased a business or professionally represented or counseled business owners.  In California, one need only become a licensed real estate broker to sell business opportunities.</p>

<p>At a minimum, a qualified business broker can greatly facilitate find the right business, especially if the broker is well acquainted with your purchase criteria. Although there are many <a href="http://www.qbsnet.com/buying-a-business.php">business listing services</a>, some brokerage firms have software programs that can consider your purchase criteria, investment amount, owner benefits and other factors and produce a more focused and narrow search (see: http://www.qbsnet.com/buying-a-business.php).  This can be extremely important.  As you will soon find out, unlike purchasing real estate, evaluating a business is a very time consuming process. Therefore, it is important to apply your resources effectively.</p>

<p>So how do you go about finding a good business broker? Our <a href="http://www.qbsnet.com">Quantum Business Solutions Network</a> professionals have listed a few essential ingredients in your search for a competent business broker (for a description of the full range of business broker services offered to <a href="http://www.qbsnet.com">California business buyers and sellers</a>, please visit http://www.Qbsnet.com).</p>

<strong>Before you sign an Agreement</strong>
<p><strong>Broker’s profile</strong><br />

The best brokers are affiliated with accredited Associations relevant to their state and profession. For example, in the state of California, the best business brokers are registered with the California Association of Business Brokers (http://www.cabb.org) and the International Business Brokers Association  (http://www.Ibba.org).</p>

<p>Make sure the <a href="http://www.qbsnet.com">California business broker</a> is qualified to provide competent representation. The firm or the individual should have their own website which is regularly updated with news, articles and business listings. Excellent contact details, company profile as well as having well qualified  professional such as accountants, attorneys, etc.</p>

<p><strong>Expectations</strong><br />
The business broker should clearly attempt to understand your exact purchase criteria, investment objectives, background and experience.  This will ensure that the broker is not wasting your time and missing viable business opportunities in the marketplace (a good business brokerage firm will maintain its own network of listings, many of which are not “published” and unavailable to the general public).  In addition, a competent business broker will continually narrow the focus of the search based upon your constant feedback. There should be a mechanism in place to accomplish this task.  Quantum Business Solution Network employs uniquely designed business buyer software which constantly narrows the search and identification process.</p>

<p><strong>Communication</strong><br />
Take some time before committing to a particular business broker and see how responsive he or she is at the outset.  Attempt to inquire about the nature and scope of the services offered.  Determine if they respond in a timely and comprehensive manner. </p>

<p>The best business brokers are excellent communicators and always respond in a timely manner (in business purchase and sale transactions time kills deals) and often serve an indispensible element toward ensuring the flow of the transaction toward a smooth closing.</p>

<p>The listing agreement/contract should include: <br />
<ul>
<li>length of time they will be representing you (6-12 months is typical) </li>
<li>the type of the agency relationship offered by the broker (you want the broker to serve as your “exclusive” agent)</li>
<li>the manner and payment of the broker’s compensation</li>
<li>the nature and scope of the brokers duties</li></ul>
</p>

<p><strong>About the Author</strong><br>
<a href="http://www.qbsnet.com">Quantum Business Solutions Network</a> is a full service <a href="http://www.qbsnet.com">Southern California business consulting</a> and <a href="http://www.qbsnet.com">licensed brokerage firm</a>. Quantum Business Solutions Network is comprised of professionals that combine valuation, financial, marketing, legal, accounting, tax and transactional structuring expertise to initiate, execute and consummate business acquisition and divestiture transactions.</p>

<p><strong>Copyright</strong><br>
&copy; Copyright 2007, Quantum Business Solutions Network. All rights reserved. <br>
This Article is Copyright protected. Republishing & syndication of this article is granted only with the due credit, as mentioned, retained in the republished article. Permission to reprint or republish does not waive any copyright. The text, hyperlinks embedded on the article and headers should remain unaltered. This article must not be used in unsolicited mail.</p>

10 Things you should know before buying a business in California

The decision of buying a business is a very crucial one and should be made only after reviewing all the information available. A buying decision should be made only after all the doubts and uncertainties are removed and you are able to anticipate all of the obstacles that stand before you. There are some essential points to consider when considering the purchase of a California business.


Following are 10 important points, which if kept in mind, can help you as a business buyer to capitalize on the opportunities that present themselves before you.

1. Purchase the assets and not the entity:
   
   Unless there are intangibles of the business for sale which are not transferrable and represent substantial value, attempt to buy the assets rather than the entity itself. This is important so that you are not exposed to any liabilities of the business before you acquired it and so that you receive an increased tax basis equal to the amount of consideration you pay rather than what the business may have paid for the asset long ago.


2. Employ Professionals:
   
   In order to ensure that the financial and operational representations made to you by the seller are accurate and complete, it is imperative to hire a competent business broker, attorneys, or CPA to assist you with respect to your required due diligence. Furthermore, once you are committed to the purchase and obtain an acceptance of your Letter of Intent (see below), hire a lawyer familiar with business disposition and acquisitions to review the contracts and related documents.


3. Submit an Offer to Purchase through a Letter of Intent:
   
   A letter of intent (LOI), typically non-binding, is a two or three page document between the buyer and seller of a business which details all of the material terms and conditions to which both parties would be willing to commit to. It is prudent to discover whether the parties are capable of achieving an agreement BEFORE employing the expensive services of professionals such as attorneys and CPAs, to conduct due diligence and prepare/review documents. Thus, if the parties can “hammer out” the key terms, the professionals can later focus on consummating the transaction.


4. Accounts Receivables:
   
   Often times a key asset of any business is its accounts receivable and there may be a substantial balance outstanding at the time of closing. It is not recommended that you purchase the accounts receivable as an asset of the business (in fact, is not typical for the California business buyer to acquire any cash or cash equivalent items in an asset sale); however, you ought to attempt to collect the accounts receivable on behalf of the business seller in order to remain in contact with the customers after the sale and ensure a smooth transition. If you do purchase the accounts receivable you should do so at a discount, the amount of which is dependent on the seller’s past allowance for bad debts, with a right of offset against monies due the seller for uncollectible accounts.


5. Discover the facts and circumstances surrounding the lease:
   
   The continued success of the business is often entirely dependent on the existing location of the business (to ensure the maintenance of the existing customer base or the retention of key employees). Accordingly, you must determine the remaining term of the existing lease and if not substantial, confirm with the landlord whether you can obtain a new lease on terms and conditions similar to the past before you buy a California business. Learn whether the seller has a security deposit with the landlord, and if so, that the landlord is so notified in writing.


6. Determine whether there are any prepaid expenses:
   
   As mentioned above with respect to the security deposit relating to the lease, prepaid expenses and deposits are usually not included as part of the assets purchased from the California business seller. Therefore, it may be advantageous to define the assets of the business quite broadly at the time you prepare your LOI. If these items are not included, then make sure you get a schedule of “closing adjustments” from the seller and escrow so that you can budget accordingly -- since these items are prorated through closing and tacked onto the closing costs.


7. Pay attention to Bulk Sales Laws and Sales and Payroll Tax Obligations:
   
   Many states require that the buyer (or escrow agent) of a business publish notification of the business sale to creditors in order to receive the business assets “free and clear” of creditor claims. Similarly, the law in many states allow for the taxing agency to pursue the business assets of the seller for any unpaid taxes unless the seller obtains a “tax clearance certificate.”


8. Obtain Seller Indemnity and Right of Offset:
   
   No matter how diligent you are in reviewing the business seller’s records and all available information, there is still a possibility that you will be presented with a claim against the California business which arose before the closing. In that case, it is important to obtain an indemnity provision from the seller of the California Business in the Asset Purchase Agreement. Moreover, if the seller is financing any portion of the transaction, a right of offset will provide the buyer with the right to offset any such claims against monies due the seller.


9. Negotiate for a Management Assistance Period:
   
   In order to ensure a smooth and orderly transition of the business following the closing, negotiate for the business seller to remain available after the sale to provide short term training and necessary introductions to customers, clients and vendors. In addition, make sure the business seller remains available thereafter for in person or telephone consultations for issues and matter overlooked during the training period.


10. Familiarize yourself with Seller’s Employees:
    
    Before closing escrow and removing the due diligence contingency, meet with each of the business seller’s key employees to ensure they have a desire to remain with the business after the sale. Thus, you can include a provision in the Asset Purchase Agreement that as part of your due diligence, you are entitled to “announce” the proposed California business sale to all employees of the business within 48 hours of the closing to meet and interview the employees to determine, to your reasonable satisfaction, that the employees are willing to continue their employment with the business.

Many times buyers get confused and intimidated by all the procedure involved in the acquisition of a business, especially those who are venturing into the market for the very first time. Hence it is very important that you obtain proper guidance and before investing your valuable money.


About the Author

Quantum Business Solutions Network is a full service Southern California business consulting and licensed brokerage firm. Quantum Business Solutions Network is comprised of professionals that combine valuation, financial, marketing, legal, accounting, tax and transactional structuring expertise to initiate, execute and consummate business acquisition and divestiture transactions.


Copyright

© Copyright 2007, Quantum Business Solutions Network. All rights reserved.
This Article is Copyright protected. Republishing & syndication of this article is granted only with the due credit, as mentioned, retained in the republished article. Permission to reprint or republish does not waive any copyright. The text, hyperlinks embedded on the article and headers should remain unaltered. This article must not be used in unsolicited mail.