Why is it so Hard to Find a Good Business?

Frustrating Search for a Business Opportunity

Frequently we are asked why it is so difficult to find an existing business to buy.  There are many reasons for this.

• Lack of a Central Database of businesses for sale
• Difficulty to Properly Investigate the viability of a business for sale
• Lack of properly advertised information

• Not being able to rely on one Commercial Business Broker?

• Not having the proper criteria in place before beginning your search

Let’s look at these a little more in depth, starting with the Lack of a Central Database.  People often ask, doesn’t the MLS have business listings?  The MLS does have business listings, but only a very small portion of those businesses that are actually for sale.  One of the main reasons for this is that the members of the MLS are primarily agents who are listing residential properties.  Business Brokers and other Commercial Real Estate Professionals are not on the MLS.   Business Brokers tend to use Third Party Business Listing websites, which is a difficult for you as a buyer to sort through, as there are dozens of them, and they all are lacking in one way or the other.  When it comes to Commercial Properties, there are also third party websites for advertising properties for lease and sale.  All this leads to fragmentation, which leads to a pretty poor user experience.  Which leads you to be incredibly frustrated as you try to navigate all of the various sources of information.

This segues into another point, which is the lack of properly advertised information.  When you do come across a listing that you like on one of the various sources, what do you do with the information presented.  It is often vague, and lacking in enough detail to get you interested.  If you are curious enough to inquire, then you get no information back, and on top of that you are asked to sign some complicated looking NDA forms.  These Non Disclosure Agreements (NDA) are par for the course when looking at businesses for sale, there is a reasonable expectation that you will not publicly disclose confidential information about the business that you have inquired about.  Just make sure to read the forms carefully and sign them if you are comfortable with the terms of the agreements.  Now, with different brokers and brokerages, you are going to get a whole variety of information, some of it incredibly detailed and some of it incredibly lacking in detail.  This is frustrating, because you are not able to compare apples to apples.  Sometimes, you will find that the numbers in the ad are much higher than the numbers in the financial statements that you are being given.  Sometimes, this is because of legitimate addbacks, but often times it is because of wishful thinking like future profits based on theoretical assumptions.

This now segues to the next point which is the difficulty in investigating listings for sale.  Let’s say that you are able to identify a listing for sale that you like and you proceed to make an offer based on the initial due diligence you are able to perform.  How the Due Diligence process unfolds is completely different in every scenario.  In some cases, the sellers are open, and in others it is like pulling teeth to get any information out of them.  Also, some brokers are heavily involved and others are not.  Sometimes you have to rely on information from vendors, governmental agencies, etc.  You get the drift, you have to do a lot of homework, in a short amount of time, with no real standard process to follow.  No wonder so many of the buyers that call us for a business listing and then mention that their previous attempts failed due to so many random circumstances.

Can you rely on one broker to help you out?  No, in the commercial real estate and business opportunity fields, there is no central database, as such it is very difficult for one broker to have access to all listings that will be a fit for you.  This leads us to the following ‘solution’ to the problem of finding a good commercial real estate or small business opportunity.

Now, one way to alleviate all of this is to have proper criteria in place before you begin your search.  Narrow down the type of business or property you want, the area you want it in, and how much you can really afford.  At a recent meeting that I moderated, Dave Leahy of VR Business Brokers Newport Beach, CA made the point “Just because you know how to eat pizza, doesn’t mean you know how to successfully own a pizza restaurant.”  His point is valid, know your skills and limitiations, and search accordingly.

For More information on how Just Elementary, Inc, Commercial brokers can help you with your search call our Client Care Manager Sonia Chhabra at (888) 926-9193 or email cs@justelementary.com