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FAQs for Buyers : « Search Again
Why do I need business broker? Who pays the broker’s commission? Do I need a lawyer? Can I use more than one broker? How many businesses should I look at? How do I pay for the business?
Why do I need business broker?
Answer:
The difficulties in buying a business are:
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Who pays the broker’s commission?
The seller typically pays the broker’s commission unless you choose to retain the broker to represent you.
Do I need a lawyer?
You are making a large investment with many unknowns; therefore, you probably should hire a lawyer and an accountant familiar with business transactions. A good broker can recommend support services to you.
Can I use more than one broker?
Your interests are best served if you deal with one broker, provided he/she subscribes to multi-list services. If you use multiple brokers, none will give you the attention you may need. You probably are not under contact to any broker, so you can use any or all you want.
How many businesses should I look at?
Every business is unique, so you must evaluate each on its own merits. Unlike houses where you look at a large number before buying, businesses are not conducive to "comparison shopping". Few good businesses are available, and those that are will likely sell while you look for something comparable. Evaluating one business can be consuming. Evaluating two businesses likely will become confusing and nonproductive.
How do I pay for the business?
Small businesses typically require down payments of 20-50% of the value (about one to two times the business’s annual cash flow). The debt service on the balance will be between prime and prime plus 2% for 3-7 years. A business is fairly priced if the income can provide you a living, pay debt service and provide a small risk premium.
