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choosing a broker

If I may give some advice for someone looking for a broker to sell their business from someone who has bought a business and is looking for another one. See first post for more

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Fairfax County, VA

Hi Buy-a-Company,

I saw that you said somewhere you have experience buying websites. I am talking to an online business owner about purchasing his site. He is asking close to 2.5 times the trailing 12-month earnings. It has a solid 5 year earning history and the owner has shown me the financials. The revenues have fallen slightly after the first 3 years but it has been pretty steady in the last 2 years.

There is a good chance that we can improve it and get more earnings. That is the plan of course--and the owner is selling because he doesn't have time to improve it. Do you think about 2.5 times 12 month earnings is a good valuation for online businesses as long as we can verify the earnings?

My worry is that on flippa.com, I see many sites selling in auction for less than that. I understand that it depends on the site, but I am concerned about overpaying.

May 8, 2010
Buy-a- Company

Ahh, I feel your pain. I had to learn all that the hard way, too.

Never again will I pay 10% of my life's work to some guy trolling the web for leads.

Things you might think a broker should do, but doesn't: verify the potential buyer's credentials before divulging too much info, have boilerplate letters of interest/intent and purchase agreements for buyer and seller to take to their attorneys, to help get the process started, stay on top of the deal, so that minor misunderstandings don't grow to deal killers, understand how businesses work, etc. The truly valuable tasks are often pushed back on the seller, meaning the seller paid someone way too much for value received.

May 5, 2010
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Please use a local broker and, no, an hour and a half away is not local. It is very frustrating dealing with brokers who don't know the area, the local quirks of each community and the "mojo" of the business.
Please divulge everything to your broker before anything is listed. For example, cash flow and how many hours ownership is working to make that cash flow happen is something that should be thoroughly discussed and not something that a broker should get back to me in a week or two.
Use a broker who has a website, and a website that is constantly updated. It's 2010 for pete's sake, get with the times or give up. Craigslist does not count as their website!!!!!
If you use an older broker make sure they are at least contemporary with the times.
Make sure your broker isn't arrogant and cocky. Respect is important.
Don't deal with a part time broker. Full timers are usually best.

If I think of more things that piss me, i will let you know.

May 5, 2010

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