If you have started the search to buy an online business then no doubt you will have come across online business brokers along the path. Although most business brokers represent sellers they can be highly valuable to buyers too. Why then, you may ask, should you use a broker to purchase an online business?
Finding the best business
Unlike the offline world, the sale and purchase of online businesses is still in its relative infancy which presents buyers with opportunities as well as some challenges, in particular, quality and quantity of businesses available. Regulatory oversight of the industry is still some way off and as a result, fraudulent activity is high. Unregulated marketplaces and some internet forums are popular candidates for the sale of misrepresented or fraudulent web businesses and so buyers should be cautious about making purchases through these channels. Likewise, brokerages with little or no track record can in some cases list businesses of dubious quality either through inexperience or to build profile. Working with an established online business broker is almost certain to ensure that the listings you are reviewing are of good quality. Most brokers operate on a success-fee only so are incentivised to ensure the listings they take on will pass through due diligence and close successfully. Serious brokers will vet the website before agreeing to take it on and then independently verify the business’ financial and operational performance before listing.
Education and advice
Regardless of whether you’re relatively new to online business acquisitions or a seasoned investor, you should use a broker for information, guidance or advice where needed. Whilst they are vested in the sale of the site, a good broker will provide invaluable advice to the buyer on all areas of the transaction process. A serious brokerage will be on hand to educate and support the buyer through the process, highlight due diligence areas of interest, provide relevant business referrals and nurture a good relationship with the seller. In other words, a good broker will make the business purchase process a smooth, secure and enjoyable experience for any buyer.
Buffer between buyer and seller
Brokers can be a useful conduit between buyer and seller, particularly during delicate negotiations. There may be instances where a buyer has to retract or modify an offer and times where an aggressive negotiating position is needed. It’s important to maintain a good relationship with the seller, not just to secure the sale but for ongoing training and support post-closing, and so an intermediary can be beneficial to harbouring good relations through this tricky stage.
Paperwork and process
A business purchase, no matter how small, requires a tremendous amount of coordination and document chasing. The data you’ll need from a seller to evaluate a business, the documentation required to close a deal and the overall chasing that must be done between buyer/seller and their professional advisors, can be astounding. A good broker will be an enormous help putting all of it together.
Picking the right online business broker
Finding and working with the right broker is an important step for your business purchase. You should do some research before working with any firm. Below are some of the questions you should ask of a professional brokerage:
- How experienced are they?
- How many transactions have they been involved with?
- Have they ever owned their own business?
- Do they specialize in a particular business type?
- What references can they provide?
- How many clients are they working with presently?
- How many agents work in their office?
Building a good broker relationship
After establishing their reputation, you should look to foster a strong relationship with the broker to ensure you align interests. In your opening dialogue you should prepare a list of the types of businesses you’re interested in purchasing (and ones you’re not), be upfront about how much money you have to invest and ask for suggested listings. It’s important to demonstrate that you are a serious buyer and ready to move if the right opportunity comes along. You should try to maintain regular contact with your broker and keep them apprised of your investment situation. Business brokers have an important role to play for both the buyer and seller. Use them effectively and they can be a solid asset to help you complete the deal. Likewise, if they do not demonstrate a serious commitment to follow up on your requests, then get another broker. But remember, no matter how effective a broker is, when all is said and done, the task of buying the right business is ultimately, entirely, in your hands.
If you’re interested in learning more, contact FE directly and a dedicated broker will get in touch with you to discuss your situation.