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here to contact us about business acquisition
search representation
What
is Bay Business Investment's buyer acquisition search representation
service?
A:
If you have been searching for a business to
buy in California, you may have discovered that
it can be a time consuming and perhaps frustrating
experience. The reason is simple: There are more
Buyers than there are realistically priced and
desirable businesses for sale. The
law
of supply and demand
would lead one to think that prices of businesses
would rise in this situation, but generally this
has not been the case because a business still
must pass the "acid test".
That is, with typical financing the
business must be able to pay the new
owner a salary and service the debt, which puts
a cap on the price/earnings ratio.
To make matters worse from a Buyer's prospective,
there is now a large pool of new Buyers on the market.
These are mid and senior management people who are
victims of downsizing and who either can't or don't
wish to rejoin a large corporation. Instead, these
displaced executives see the purchase of a business
not only as a job replacement, but as a way to take
control of their future. Usually they have ample
funds available in a pension or equity in their home
to make this a real possibility, provided that a
suitable business can be found.
How can a Buyer gain an edge in this highly competitive
environment? If desirable, realistically priced businesses
are in high demand, then a Buyer needs a marketing
edge to help ensure that he is one of the first to
be considered when such a business becomes available.
That edge is a Buyer Representation Agreement. Buyer
representation has been in use for many years in
commercial real estate and in investment banking.
For example, when a company wishes to grow through
acquisition, they frequently retain an investment
banker to do the search. However, the concept is
relatively new in the buying and selling of smaller
businesses ($20MM or less in sales) that Business Advisors typically sell. Here is how it works. The
Buyer and broker enter into an agreement:
1. During the agreement period the Buyer agrees to
purchase a business only through the broker.
2. The Buyer pays a retainer to the broker, which
will be later credited to the Buyer's account when
a sale is made.
3. If the seller does not pay a fee to the broker,
then the Buyer agrees to do so. Remember, a Buyer
always pays the fee, sometimes it is direct and sometimes
it goes through the Seller.
The advantage to the Buyer is that he now becomes,
in the broker's eyes, a serious Buyer and so gets
primary attention. Other Buyers who are shopping
around with various advisors or are perceived as less
committed, get called last. Another big competitive
advantage for the Buyer under this type of agreement
is that the broker is now free to pursue businesses
that are not currently listed without worrying about
collecting his fee from the seller because the Buyer
has agreed to pay the broker. When a broker can call
a business owner and state that he is being paid
by the Buyer, the seller is more likely to believe
that the Buyer (and the broker) are serious. More
doors are opened.
Preliminary numbers indicate that Buyers who enter
into a Buyer representation agreement are approximately
five times more likely to succeed in the purchase
of the right business. Success depends on realistic
expectation, the ability to move quickly if necessary
and in selecting the right broker as a partner in
the search. In deciding upon a broker to represent
you in a Buyer Representation Agreement, find a professional
one that you like, and trust.
What
is the process of an exclusive buyer representation
search?
A: Many buyers don't want to wait for the right
business to appear on the horizon or they
are tired of just
missing businesses that get sold immediately
when listed, they want to be proactive and have
us find
them the "right business". For those
buyers we offer our services in the form of a
formal acquisition
search. A search where we spend between 2 and
3 hours with the buyer defining exactly what
kind
of business
is the "right business" for them. We
normally meet with the buyer and his/her spouse
(when applicable)
going through a very intensive Acquisition Criteria
Worksheet to better define what is the "right
business". Many times the buyer themselves
are not sure of what kind of business is the "right
business". Upon completion of the worksheet
and approval of the buyer of what is the right
business, we begin our search.
Next we get on the phone and start knocking on doors.
We find that loaded with this information we can
zero in on businesses that are an exact match. Many
times the businesses are businesses that normally
wouldn't be for sale. Why, because when we bring
in a qualified buyer who has expressed an interest
in buying a business exactly like we defined in our
acquisition search, we find the business owners are
a lot more open minded about selling their business.
Plus, you are the only buyer who is looking at buying
that business, no competition from other buyers and
no need to rush into an offer until you are ready.
Call us to start your acquisition search, it's the
best investment you'll ever make.
How
much does it cost?
A: It can cost as little as nothing, but
we do charge you an initial search fee of $5,000,
which can be reimbursed back to you when you
buy a business through us. What if you never
buy
a
business?
You lose
the $5,000.
Please contact us for more information
