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Advantages and Disadvantages of Buying a FSBO Business
FSBO "For Sale by Owner" is when the business owner tries to sell their own business or property for sale. Some of the advantages and disadvantages of buying a FSBO business for sale are:
1. Price - FSBO businesses are likely to have a lower purchase price than those being sold with professional assistance. Typically, a business broker or agent will charge the business seller a predetermined percentage of the business purchase price as a fee.
2. Time - The sale process of a FSBO business is likely to be quicker as information is communicated directly between the buyer and seller without the involvement of a business broker or agent. The buyer and seller should have their accountants and legal advisors verify the financial information and purchase agreement.
1. Inaccurate Information - When purchasing a FSBO business it is often difficult to determine if everything you are being told about the business is true. Some business owners tend to lie or exaggerate their business profits. Having a business broker or professional intermediary in place will help verify financial statements as well as the other important aspects of the business.
2. Price - There are many business owners who believe that their business is worth more than it actually is, and they expect to sell their business for a high price. Having a business broker, professional intermediary and accountant on your side can help you determine a fair price for the business.
3. Negotiation - In negotiations between buyer and FSBO seller, they may be times when negotiation is difficult and comes to a stall. With the advice of a third party such as a business broker or agent, negotiations may be easier and the broker can help to speed up the sale process.
4. Due Diligence - Before buying a business, the buyer must perform due diligence on the business, which is a thorough and complete investigation and review of the business. Due diligence could be more difficult when buying a FSBO business - a business broker with specific experience in a particular type of business can help with the due diligence process.