20 Feb How To Find Your Ideal Business
Searching effectively for a business is an important skill, because if you can’t find a business for sale, you can’t buy it.
The first step in finding a business for sale which is right for you, is deciding the type of business opportunity you are looking for. You will need to consider the industry, location, operating hours, level of involvement you can commit. As well as any requirements for licences or technical qualifications.
However, the purpose of this post is to offer you information on how to go about finding your ideal business once you’ve decided on the type of opportunity you’re looking for.
There are five (5) primary methods used to find a business:
- Online search / website listings.
- Business Brokers.
- Direct approach.
- “Wanted to buy” advertisement.
- Business Buyers Agent.
Below we summarise the positives and negatives of each method to help you decide on the best method for your search.
1) Online search / Business for sale website listings.
Firstly, an online search is probably the most obvious and accessible method of searching for a business for sale. There are numerous websites available that allow both business owners and brokers to list, advertise and promote businesses for sale. Sites include anybusiness.com.au, seekbusiness.com.au, Bsale.com.au, commercialrealestate.com.au, businessforsale.com.au, Business Brokers Network Australia, Gumtree and Facebook marketplace just to name a few.
The positives of searching online include:
- Cost – It’s free! There are no costs associated with searching and no membership or joining fees. It is simply a website where you can browse all available businesses for sale at your leisure. You can even set up a buyer profile and email alerts when a business of interest is new to the market.
- Large number of current listings – At the time of writing this article, anybusiness.com.au had 4,771 businesses listed for sale in New South Wales alone.
- Filtering – You can apply filters to your search to help you compile a list of businesses for sale which match the type of business opportunity you are looking for. Using com.au as an example, you can filter by location, category, price, as well as custom search terms.
- Email alerts – You can set up email alerts based on your preferred search criteria to be automatically notified of new business listings.
The negatives of searching online are:
- Number of listings – We’ve listed this as a positive and negative because, as mentioned above, at the time of writing anybusiness.com.au had 4,771 results in New South Wales alone. It’s easy to be overwhelmed with the range of choice offered online and you can quickly get bogged down with so many opportunities to review.
- Listing quality – Some businesses are listed and advertised multiple times, under varying categories to increase the listing visibility. It can be both frustrating and confusing to see the same ad multiple times.
- Sold listings – Most sellers will list businesses for sale on multiple websites. This sometimes means whilst the business is still advertised, it may already be sold or under contract and the ad has not been updated to reflect this. Often this is accidental, but in rare cases, a listing may be falsely advertised to generate enquiries and create the opportunity to discuss other businesses for sale.
- Time consuming – Monitoring and keeping up to date with all the business for sale websites can be an arduous task and very time consuming.
2) Using the services of a Business Broker.
You can contact an experienced and certified business broker. A reputable and professional business broker will be able to assist you in your search to buy a business.
There are approximately 300 other business brokers registered with the Australian Institute of Business Brokers (AIBB).
The positives of contacting a reputable business broker include:
- Cost – it’s free. Business brokers charge the seller a commission for selling their business, which means that there’s no cost for the business broker’s service to a buyer.
- Experience – A reputable and experienced business broker will be able to help you ask the right questions and walk you through the process of buying a business. This may prove invaluable, especially if you haven’t bought a business before or are unsure of the buying process.
- Documentation – A good business broker will ensure the business for sale has records that are up to date and will have prepared an Information Memorandum which will provide you with comprehensive and detailed information about the business (including financials, assets, leases, special conditions, etc).
- Business quality – A good business broker who cares about their reputation, should understand that selling poor quality businesses, misleading buyers or overpricing a business is not only unethical, but will damage their reputation. Most business brokers will only list quality businesses. However, this doesn’t diminish the need to conduct your own investigations.
The negatives of contacting a business broker include:
- Representation – A business broker’s job is to sell businesses, therefore they represent the seller. You should be aware the business broker is not obligated to act in your best interest. In saying that, an experienced and professional business broker understands that the best sale is one that is successful for both parties.
- Opportunities – As mentioned above, whilst there are thousands of businesses listed online for sale, an individual business broker typically will only have 20 – 40 listings at any one time, which they may suggest to you as an alternative business to consider purchasing.
- Time consuming – Because an individual business broker has only a limited amount of businesses for sale, you may need to contact multiple business brokerages in order to find the right business for you. To use an analogy, if you were looking to buy a house, you wouldn’t only talk to one real estate agent.
- Reputation – Not all business brokers are reputable. It’s a good idea to check their certifications and even reviews.
3) Direct Approach to a business for sale.
You can approach the business owner directly and express your interest in possibly buying their business. You can do this in person, over the phone, via email or even social media.
The positives of approaching a business owner directly include:
- Unlimited range – Whilst there are thousands of businesses listed for sale, there are over 1.3 million businesses operating in Australia*. You can enquire about any business with a direct approach.
- Willing to consider an offer – Around 50% of business owners would consider selling their business if approached to do so.**
The negatives of contacting an owner directly are:
- Time Consuming – Approaching business owners directly can be very tedious. Not only do you have to find a suitable business, but you then need to identify the owner/s, establish the best proposed contact method and approach the owner, preferably in private or in a very respectful manner. Then, if the owner wasn’t already thinking of selling, they may not have up-to-date financial records or information they can readily provide you with. The required financial reports will need to be completed by the owner’s accountant, and other pieces of information such as lease details, assets and inventory lists, employee details, etc will need to be collated, all of which takes time.
- Valuation – The owner may have an unrealistic expectation of the value of their business. An offer which doesn’t represent or reflect the value (as the owner sees it) may cause offense and create an uncomfortable starting point for any discussions and/ or negotiations.
- Costs – If the current owner does not have reliable up-to-date financials, conducting and completing due diligence will take longer and may result in increased work for your accountant (also increasing costs).
- Demotivating – As noted above, contacting business owners directly with a view to possibly buy their business can be a drawn out process and the success rate experienced by most buyers is quite low. This can be a very disheartening experience.
4) “Wanted to Buy” advertisement.
Posting a “Wanted to Buy” ad through any of the business sale websites listed above, via social media, or even print media may generate enquiries from business owners who are considering selling their business.
The positives of posting a “Wanted to Buy” ad include:
- Relatively quick process – Posting a “Wanted to Buy” ad usually only takes a short amount of time to list out the ad content, best contact details and publish to various platforms.
- Inexpensive – Posting a “Wanted to Buy” ad is free on platforms such as Gumtree, Facebook marketplace, Trading Post , etc. The cost of advertising on a business for sale website varies dependent on the website.
The negatives of posting a “Wanted to Buy” ad include:
- Limited reach – As previously mentioned, whilst 50% of business owners would consider selling if they were presented with an offer, most business owners would not be actively looking at these types of ads.
- Listing quality – Because most business owners aren’t actively looking to sell, the majority of owners who make contact will be in some form of distress or the business may be suffering. Their reasons may include health concerns, family issues, direct competition, external environmental concerns, or simply, a business that is facing strain and hardship.
- Time-consuming – Similar to when approaching a business owner directly, the owner may not have up-to-date financial records which they can immediately provide you with and having these reports completed by their accountant can add further delays.
5) Use a Business Buyers Agent.
The final option is to use a professional Business Buyers Agent, such as Merchant Buyers Agency.
A credible, professional and well-connected business buyer’s agent will be able to help you find your ideal business and buy it on the best terms possible.
The advantages of using a Business Buyers Agent include:
- Wider reach – A Business Buyer’s Agent will have a network of business brokers, accountants, lawyers and other industry professionals who they can contact to assist you in your search for a suitable business.
- Credibility and experience –Engaging a buyer’s agent enables you to utilise and benefit from their knowledge and expertise and avoid the common pitfalls most buyers face. Whether you are yet to buy your first business, or have been involved in many transactions. The experience and exposure a buyer’s agent has across various industries, dealing with an array of businesses, can be invaluable.
- Valuation – A buyer’s agent will have access to a database of historical business sales records and can provide advice and support to ensure the purchase of a business for a fair and market-valid price.
- Multiple strategies – A buyer’s agent can employ any (or all) of the above strategies on your behalf, saving you time and other resources.
- Additional support – When buying a business, the process includes many aspects and therefore requires a team of industry professionals such as accountants, solicitors, lawyers, financiers and brokers. A buyer’s agent can work with your advisers or recommend other professionals who you can trust.
The disadvantages of using a business buyer’s agent include:
- Cost – A buyer’s agent will charge for the service they provide.
- Transparency – Like all professionals it can be difficult to judge if your buyer’s agent is knowledgeable and is providing a great level of service. Don’t be afraid to ask questions of a buyer’s agent to ensure they are knowledgeable and professional, just like you would an accountant, lawyer or any other professional.
- Lack of control – Trusting a buyer’s agent to search for a business for you means handing over some control. However, don’t be afraid to send opportunities you find to your buyer’s agent. A good buyer’s agent will welcome input and suggestions from you. Your buyer’s agent should also provide you with regular updates on opportunities they have considered, and actions they have taken, to find you a suitable business.
*As at 30 June 2018 according to ABS dataset – 8165.0