Bridging the Way BayState Business Brokers blog

You Can’t Buy a Business from a Brochure

by | Apr 19, 2012

The process of buying a business starts with a buyer learning about a business for sale that we are marketing and requesting the Confidentiality Agreement.  After the business buyer is qualified and signs the Confidentiality Agreement, they receive the Confidential Business Review about the business. This report gives a great deal of information about the business, including financial statements. Unfortunately, for many buyers, reading this report is all they do to evaluate the business. This is a mistake.

Think about the other large purchases that a person is likely to make in their lifetime – buying a car or home.  No one would make a decision by only reading a brochure or looking at an advertisement.  Buyers understand that they need to test drive a car to see what it feels like before making a decision about buying that car.  You need to walk through a house and really look at the yard and neighborhood to know whether you want to live there. You need to do the same with a business

A business is much more than a financial statement.  By going out andCan't buy from a brochure talking to the owner and seeing the business you get a better understanding of what that business is all about. You’re going to be replacing the owner and by talking to him you get a much better idea of what it takes to replacing his skills in that business. A business owner will be more open about his business with a buyer who takes the time to meet with him.   You will learn a lot about the business by seeing it.

Another benefit of visiting a business and meeting with owners and interviewing them is that you get experience in doing it.  When you find the right business, you’ll have other businesses and owners to compare it to.  You’ll also have a better idea of questions to ask and you can do a much better job of evaluating that business and that owner.  You also show people, like business brokers, that you’re a serious buyer because you’re taking the time and effort to meet with business owners and look at businesses.

I’m not suggesting that you should go out and take a look at every business for which you sign a Confidentiality Agreement.  I don’t want you to waste your time.   What I am saying is that the Confidential Business Review should just be a screen for you to determine is this is a business that you might be interested in buying.  If it is one that you might be interested in buying, take a look at the business, talk to the owner, and learn a lot more about it.



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