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Getting Advice on the Internet, in Buying a Business
Frankly, a lot of the advice you get is virtually worthless! (Not ours, of course…)
What you should look for from Electronic Bulletin Boards (EBB) and other sources of information is, who is rendering the advice? If you look at the source, you will find that the majority of such advice is from people who have extremely limited experience and knowledge, and sometimes have none, what-so-ever! MANY of the answers to questions posed on an EBB are simply bored people with nothing better to do at 2AM, so they cruise the Net.
Some are people with their own agendas. They are skewing information to their own ends. They may be Brokers who tell you there is no other way to go, except through Business Brokers. (We are Business Brokers, but try to take a balanced look at even our own limitations, as you will hopefully note if you have read our other blog posts.) They may be Lenders, promising the World which, if you understand lending at all, you will realize are cheap come-ons that cannot be fulfilled. They may be Attorneys and Accountants (and others) who provide decisive answers that should never be addressed on an EBB, because there is not enough information provided to allow definitive answers to be rendered.
The Internet is essentially free. If something is free, it is without cost; if it is without cost, it is sometimes without value… Understand where we are going?
That is not to say ALL people on the Net are worthless, or that all of the free information you can get is without value. Far from it. But you need to be a very discriminating reader. Again, understand the source of the information you are getting. Think about the writer’s motivation. And use the Net to be more inquisitive about the subject at hand. Double-check the information from a multitude of responsible sources. Do not necessarily adopt an answer from an unknown resource as gospel.
In particular, we routinely see people asking for very specific legal advice, on a number of EBBs. They also frequently ask us to supply them with templates for Contracts of Sale.
People, we know Attorneys are not cheap, and many are pains in the neck! (My apologies to our Attorney-friends, Alex and Andy…and they are just some of the ones beginning with the letter, “a”.) But the advice with which they can provide you, as a business Buyer, can save you immense amounts of money.
We sold a Motel, several years ago, and the Buyers decided they did not need to pay an Attorney, particularly since they were buying the business and associated Real Estate from an honorable Seller: A Bank! We pleaded with them to get an Attorney, both verbally and in writing, on a number of difference occasions, but they refused. Doing so cost them about $200,000 in cost overruns they would not have had to pay, if they had hired an Attorney to look after their legal interests, as we suggested. The costs for such an attorney would have been a minor fraction of what they eventually paid.
We will never supply a Buyer (or a Seller) with a Contract of Sale, under any circumstances. We are Business Brokers – not Attorneys. Attorneys undoubtedly get their Contracts as templates; but it is understanding the specifics of the individual transaction and how a template needs to be altered to meet the terms and conditions of the deal, as well as the industry in general, the structure of the Selling Company and the Buying unit, contingencies and restrictions applicable to both parties…there are too many issues that need to be covered in most deals, to trust them to individuals without legal educations and experience! (Attorneys are not their faults; see our blog on that subject: https://combrokerbusiness.wordpress.com/2013/04/06/business-buyers-who-is-advising-you/)
Another group that concerns us are the writers who answer posts anonymously, in the most cavalier manner, boasting that they have invested $10 in a business, and have made BIG money with their investment. We followed up with several of these people and found that the BIG money for those who responded to us was about $18 per year! Okay, that was an exaggeration. But they seriously did not earn much more than what would put them just above the poverty line. We guess it depends on your definition of BIG money.
Can you make really BIG money with almost no investment? Yes, of course! But so can hitting the Jackpot in the Lottery! That makes a lot of money, with only a $1.00 investment. But what are the odds of that happening?
There are also people who buy businesses that are losing money, and they turn them around profitably. Sometimes, very profitably. But that takes an enormous amount of knowledge and experience, on the part of the Buyer; it can take deep pockets, in order to support the business out of your own pocket and get it to profitability; it includes an incredible amount of risk, if you do not know the process. It is not for the beginner and anyone who tells you differently on the Net, is providing you with irresponsible advice.
That is the key. Most of the Net is anonymous, and a lot of the advice is irresponsible, either by the writers’ ignorance or due to their ulterior motivation. Scams abound on the business-oriented EBBs, particularly those offering loans or investment opportunities. Postings from outside of the US are the most dangerous – but you frequently never know the location of the writer, anyway. We spoke with one scam artist who passed himself off as being headquartered in Manchester, England; we kept at our research and ultimately found he was calling from Nigeria.
Use the net for research. Do not use it as the final word on anything, without exhaustive research and reinforcement of what you initially find. Our blogs, as well.
(Receive in-depth, personal consulting online, with The BAF Group’s principal at https://clarity.fm/donaldbarrick .
The BAF Group LLC is a full service Business Brokerage, with a history of more than a decade of service. Its Principal Broker possesses 25+ years of Business Sales and Divestiture. Although most of our work is involved in the Mid-Atlantic States, we have represented Sellers and Buyers throughout the Continental USA, and a number of overseas Buyers, as well. Some of our listings and additional information about us can be viewed at www.bafgroup.com. Thank you for your interest.)