In every one of my “How to buy a business seminars” I hear the same story, “Most businesses that I look at turns out to be junk.” The vast majority of buyers want to buy a good business and they could care less about what industry the business is in. My response is always been the same. Pick the industry you want and then find a business in that industry for sale. I then explain that if they can’t find it, I can.

I imagine that my last comment raises a lot of questions. One question being, “How do you find a business that is not on the market?” The answer is simple; the work is very time and money consuming, but works. I contract repeatedly every company in that industry that is not for sale already. The conversation then comes around to the buyer prospect asking me if I could find him a business to buy, without the prospect telling me what he is looking for. I learned in management school, “If you do not know what you want, you can never get it.”

For those that know exactly what they want, some experienced and financially solvent agents can do the work and get the result but at a substantial cost in time and money. Buyers are reluctant to pay for the time and costs. If they are willing to spend the upfront money, a good business broker will eventually find the deal they are looking for. Acting As a Buyers AgentIn periodic conversations, buyers ask me if I will be a buyer’s agent.I will in this article explain my challenges in doing this. I have found it is not productive to act as a buyer’s agent and locate a business for the buyer if I am going to look for listings already on the market. This is because of the following reasons.

1. The listing agent do not want to co-operate with the buyer’s broker.
2. The financials are not in proper order to market the business and the listing agent has not demanded the seller hire a CPA to put the books in good order.
3. The deal has been misrepresented and dies upon close inspection.

The only way that locating a business for a buyer makes sense is to look at what is not on the market already. The business broker must then contact any and all possibilities. To make that worthwhile to any brokerage firm, they need an exclusive buyer agreement. This means the broker gets a commission regardless of where the business comes from. Any deal that shows up after my staff starts contacting the market place, is because of our actions, even if found by the buyer or any other source.

People in marketing know that when you outflow any kind of promotional material you will get responses even when the responses appear to come from another direction. The outflow was still the prime cause of the inflow, which is why the brokerage firms are still due a commission on any closed business purchase. The buyer would never have found that business on their own, unless the brokers marketing actions were taken. This happens all the time with broker’s listings.

The owner/seller thinks he located a buyer on his own, but in actual fact the broker created the environment for the buyer to find the seller and then the seller thinks he actually found the buyer, without the broker. The truth is that the buyer was found because of the broker’s marketing actions that raised awareness. This is why listings need to always be exclusive listings.This is why if I am going to find a willing business seller the broker’s agreement with the buyer client must be long term and must be an exclusive buyer’s agreement. (Regardless of who appears to have located the deal?).

If you feel that you have questions regarding this article, please feel free to contact the author. About the Author - Willard Michlin, CPA, CFE:Willard Michlin is a Certified Public Accountant (CPA #106752), Certified Fraud Examiner (CFE) and a Business Broker. He offers assistance in the key areas involved in the buying of a business; due diligence, review of financial reports and business valuation. He is an experienced, honest and trustworthy consultant. His goal is to watch your back. His due diligence clients are all over the world. He has published many articles and is in demand as a public speaker.