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Businesses for sale without any proof of income.

For 3 years I have been looking for a business under $200K. For more times than I can say the sellers can not produce tax returns, bank statements or any other proof of the income they are advertising. Why are brokers even listing these businesses and wasting our time? Do they believe there are that many gullible buyers out there?

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Answers (9)
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The BAF Group LLC
MD

Agreed. As to "why"? Sometimes, Brokers will do something in response to a request by a friend, or a source of regular leads that they ordinarily would not list. Sometimes, they hope the Seller actually has the information, and will finally provide the documentation when they receive no bona fide offers. Sometimes, they are desperate for the listings, because they have nothing else to offer. And then - sadly - there are those that are just bad Brokers. There are bad doctors and good doctors; good lawyers and bad lawyers; good auto mechanics and...you get the idea. Brokers are no different. And it also depends on the kinds of businesses. Cash businesses are notoriously poor for documentation. Restaurants, bars, convenience stores are some of those. Those predominately dealing with credit cards or invoice systems are far better at the documentation they retain and can therefore provide to a prospective Buyer.

Sorry you got caught up in a side-show!

Apr 2, 2016
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Washoe County, NV

Looking at all this conversation I would have to say there are brokers and sellers of all opinions. I know Mr.Barrick has answered hundreds of questions here on BizBuySell and has never offered to sell me anything nor broker a deal.
I am sure there are plenty of legitimate business sellers out there that have a perfectly valid reason for selling. I owned a motel for years and I sold because I was tired, plain and simple. Nine years later the buyer of my motel is still operating it.
The initial crux of my question was why brokers list businesses without proof of income regardless of whether they are failing or not. If this is a common practice (I was told this many times), then at least tell the buyer when they initially ask that there is no documentation.

Apr 2, 2016
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The BAF Group LLC
MD

Justo, with all due respect, you are making statements that are completely false - not because I question your motives, but because you know nothing about me, nor do you read what I have written, carefully. At no time did I suggest that I could help broker a deal for this writer. He/she is in Nevada, while I am in Maryland. The chances of me helping broker a deal is virtually nil. So, no; you are not spoiling my ability to do business. You, sir are the only one trying to sell something, while insisting that doing so is not in the best interest of the Buyer?!?

I write a blog about the process of buying a business. In it, I caution Buyers on the dangers of trying to get into businesses they know nothing about. So, in that area, we are in agreement. But that is vastly different from saying that there is no reason for anyone to buy a business, as you seem to suggest.

Moreover, people sell businesses all the time when they are doing well and profits are getting better. In fact, the vast majority of SBA loan applications are predicated on funding only businesses that are stable or growing. The SBA will not lend funds for acquisitions for businesses that are failing. And 95% of my deals are funded by the SBA. People sell when they are retiring; when they are ill and cannot manage their businesses; when there is a court-required divorce; when they are selling one business and looking to get into something bigger... There are any number of reasons for someone to sell a viable, growing business. We don't list businesses that are failing, as a general rule - most often, we thank the Seller and turn him/her away!

Some of what you say has merit. Most of it is completely baseless. I am sorry you have had such miserable times, in brokering deals on your end.

Apr 2, 2016
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Mr. Don you have 15 years as a business broker not running a business. When a business is doing good owners are not interested in selling. When owners see the numbers declining is when they want to sell. I own three businesses and all of them makes me a profit. I wouldn't mind selling one just to take some work off my plate. One of my business is a charter bus company just one bus cost $500K and I own 10 buses. When I started this business I was a transportation broker and I bought each bus with customers money. I booked so much work I had enough to buy the bus and cover the work. And Now this company makes me over $200K a month. I do this because I like what I do for a living and I am very good at it. I have had other businesses in the past some I sold and others I just simply closed because was not interest in them anymore. I have also seen businesses sale because they have a good clientele and once the new owner comes in the customer canceled their services and there is nothing you can do about it. I believe if you are going to buy a business it should be something you are good at, like to do and interest you very much. Because going into a business with no experience can cost you your investment. I am just saying the truth all my businesses were started with very little money from scratch and I am still in business because customers request my services. I found it to be less expensive then buying someone else problems. You disagree with me because you would like to sell him a business and make the commission. I was just reply to C.M Batastini that has under $200K to invest in a business. I think he can do a lot better creating the business he would like to be in then buying a business that has the same risk of loosing their investment. I am very sorry that I intervened in your negotiations but just because it looks good on paper doesn't mean it will go good for you. Unless you know the business and can do better then the priviest owner. You know that every business has their competitors and are always trying to copy from others that are making money. That is why business owners are reluctant to provide some much information without a non-disclosure agreement (NDA) signed and sometimes a deposit maybe required before reveling the process of the business. I have seen business buyers come take a tour of the business then open the same business right next door to you taking your customers. I am very sorry you disagree with me but I am just speaking the truth and most of the time the truth is not pretty.

Apr 1, 2016
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The BAF Group LLC
MD

Justo, I could disagree with you in about six different ways - but in much of what you say, there is no right or wrong here; it is a matter of style and opinion. However, career of almost 40 years - only 15 of which have been involved in Business Brokerage - has involved buying and selling businesses, and much of what you wrote does not match that experience. Moreover, if that is what you believe, what the heck are you doing, trying to sell your own business, if it is not worth anything?

Apr 1, 2016
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What type of business you would like to be into? I am a business owner since 1989. I notice buyers today request too much information when selling a business. I request a (NDA) to be signed before I release any information. And that will only get you the last three months of P&L statement and proof of income. Any more information may require a deposit. No one is willing to reveal their secret to there success. My suggestion is stop buying into others success just because they made good money when they ran the business doesn't mean it will work for you. Most of the time a change of ownership can cost you a 60% loosed of customers. Just because you are not the priviest owner. You must find something you are good at and something you will not lose interest. In these days $200k just buys you a job. A job that you will need to work very hard to keep making money and not loose your investment. Unless you get into a business that you know very well, is good at it and likes what you do. With those tools in hand, will give you the chance to be a better business owner than the priviest owner. By keeping the repeat business and creating new ways in getting new customers. This is very important when determining the price you pay when buying an established business. So if you are good at the business you are getting into it is a lot cheaper to establish a new business. You maybe able to start the same business for a lot less. Hope this information was at help and feel free to reply if you need any additional assistance.

P.S. I do have a business for sale please take a look at the website charter-rates dot com and feel free to contact me at charterrates @ outlook dot com.

Best of luck,
Justo

Apr 1, 2016
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The BAF Group LLC
MD

That does sound screwy...screwy is a technical, Business Broker term! Sometimes, the best deal you do is the one you walk away from. That is exactly what I would do with this one. And for the record, as a Broker, I would not list it, either.

Mar 31, 2016
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Washoe County, NV

Thank you Mr Barrick. I will give you one such business and ask how you would proceed. The business is a cash/check type service business with very little credit card income. When I asked the broker about income verification he said this is a "mom and pop" business and they don't claim the cash on tax returns and do not have any P & L's. I do not believe sitting in the business for any length of time would give an adequate picture of revenue either. How else could a buyer do his due diligence without documentation?

Mar 31, 2016
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The BAF Group LLC
MD

To some people, it is not always a waste of time. We do not handle anything where there is such a complete lack of documentation; our more frequent difficulty is with someone who may own two or three businesses, such as two or three pizza shops, and they are all combined in one Tax Return and cannot really be separated in any credible manner. I will say that I have never come across any business where there was no ability to prove income. There may be a lack of Tax Returns, but then there are usually bank statements, or cash register reports. But I have never seen anything where nothing can be proven. Frequently, when there is missing documentation, or documentation that does not seem to be as valid as the Seller claims, the Buyer may actually even be encouraged to work in or observe the business For a mutually agreed period of time, in order for him/her to validate the Seller's Revenue claims. Some buyers want to do this with cash-oriented businesses anyway, because they simply don't believe what the Seller is claiming. But when you find the Seller who says that he is earning far more than he is reporting, the purchase price should be predicated on the Tax Returns, rather than on boasts that cannot be proven.

Mar 31, 2016

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