The Pros and Cons of buying a FSBO Business | Buy Sell a ...

When choosing to purchase a business, you will need to decide whether you will purchase a venture through a real estate company or other professional means or if you will buy an FSBO. FSBO stands for ?For Sale By Owner? and refers to a business being marketed and sold directly by the venture owner themselves. This can be a fantastic option when investing in entrepreneurship; however there are many setbacks as well. Pros and cons of FSBO opportunities include:

Pros

1. Price ? When someone choses to use an agent or broker to sell their business, franchise or venture the agent will always charge fees for their service of marketing and selling their property. This will almost always cause the price of the business to be higher than if you had bought it directly from the owner (FSBO). In short, the price of the business will be lower on average and will save you money.

2. Time ? The process of buying FSBO businesses is likely to be a lot shorter as communications are directly between the business owner and prospect owner without the lengthy involvement of a business broker/agent. Note: It is advised that both buyer and seller should have their legal advisors confirm verify the financial information and purchase/transfer agreement.

Cons

1. Price ? Many business owners may be ill-informed or ignorant about the value of their business and upon selling it through the FSBO method, end up over-pricing it. Commercial brokerages and professional commercial agents can assess and evaluate businesses properly as they have the proper experience and knowledge to do so. This way, you will not lose money on the cost of purchase.

2. Information Accuracy- When purchasing a business from its owner, it is hard to verify the authenticity and accuracy of everything that is advertised, along with other information you may receive. Business owners often exaggerate profits and popularity while leaving out any hidden problems. This can leave you disappointed and potentially cause you to lose of a lot of money. Having a commercial broker or professional intermediary to assist the process will help validate financial information as well as reviewing legal documents and agreements.

3. Negotiation ? During negotiations in the FSBO process, there may be points when negotiation is rocky and the process comes to a stall. The advice of an experienced third party such as the previously mentioned broker or agent, negotiations will likely become quicker and the broker can help to make the sale.

4. ?Due Diligence? ? Before deciding to invest money in a business, it is highly advised that a buyer first perform ?due diligence? on the business, a complete and thorough review and investigative report of the business and its past. Due diligence is often made difficult when you have interest in a FSBO business; this takes a lot of skill and time which only a commercial agent or broker may have. This becomes an advantage to using a brokerage service.

Source: http://blog.businessforsale.com/the-pros-and-cons-of-buying-a-fsbo-business/

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