How to Evaluate a Business Broker Before You Buy a Business

 When buying a business, most people focus on the seller and the financials—but overlook a critical player in the deal: the business broker.

The wrong broker can delay or even kill a deal. The right one can help it close smoothly.

Don’t Go Around the Broker

If a business is listed with a broker, always go through them.

Trying to contact the owner directly can:

• Damage trust

• Create unnecessary friction

• Reduce your chances of completing the deal

Respecting the process keeps negotiations professional and productive.

Understanding the Broker’s Role

A competent business broker typically handles:

• Valuing and preparing the business for sale

• Marketing and finding buyers

• Assisting with deal structure and financing

In many cases, they act as an intermediary, advisor, and facilitator all in one.

The Two Types of Brokers

Not all brokers operate the same way.

Some act like “shopkeepers”—taking listings at any price and simply trying to match buyers.

Others act like “experts”—setting realistic expectations, guiding sellers, and ensuring deals are viable.

The second type is far more valuable to you as a buyer.

Why Expectations Matter

A well-prepared seller understands:

• What the business is worth

• What terms are realistic

• How deals are typically structured

If the broker hasn’t set these expectations, you may face:

• Unrealistic pricing

• Resistance to financing terms

• Deals that fall apart late in the process

How to Vet a Broker

Before engaging seriously, do basic due diligence:

• Review their background and experience

• Check their online presence and activity

• Ask about past deals and deal structures

• Listen for how they talk about pricing and financing

Strong brokers will provide clear, practical answers—not vague or evasive ones.

What Good Brokers Do Differently

A skilled broker:

• Sets realistic pricing with the seller

• Educates sellers on deal structures like financing

• Encourages reasonable offers

• Focuses on closing deals—not just listing businesses

This creates a smoother path for buyers to complete acquisitions

Key Takeaways

The quality of a business broker directly impacts your ability to complete a deal. Choosing brokers who set realistic expectations and understand deal structure will significantly improve your chances of success.

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Seller Financing Explained: Turning a Business Sale into Income

 Many business owners are surprised to learn they won’t receive all their money upfront when selling their business. In small business transactions, seller financing—also known as a vendor take-back (VTB) note—is common and often necessary.

But beyond helping close a deal, a seller note can serve a much bigger purpose: ongoing income.

Why Seller Financing Is Often Required https://youtu.be/PO1M-_wq-m4 

Most buyers don’t have enough cash to purchase a business outright. Banks also prefer sellers to have “skin in the game,” which makes financing more accessible.

Without seller financing:

• Fewer qualified buyers exist

• Deals take longer to close

• Final sale prices often decline

In short, offering financing increases the chances of a successful exit.

Think Like an Investor, Not Just a Seller

Instead of viewing a seller note as a compromise, it should be seen as an investment in the buyer’s success.

This means evaluating:

• The buyer’s experience and background

• Their plan to operate the business

• Cash flow projections and debt capacity

Approaching the deal this way helps reduce risk and improves the likelihood of being paid consistently.

Structuring the Note for Success

One common mistake sellers make is demanding fast repayment terms.

While it may seem safer, aggressive timelines can:

• Strain the business’s cash flow

• Increase the risk of default

• Jeopardize the entire deal

A well-structured note allows the buyer enough breathing room to operate successfully—protecting your investment.

A Reliable Source of Income

Seller financing can become a predictable income stream, often used as part of a retirement plan.

Compared to traditional savings accounts with minimal returns, seller notes typically offer significantly higher interest rates.

This creates an opportunity to:

• Generate steady monthly income

• Preserve long-term investments

• Maintain financial flexibility post-sale

Managing Risk After the Sale

Smart sellers don’t “set and forget” their note.

They stay engaged by:

• Monitoring financial performance

• Reviewing reports regularly

• Watching for early warning signs

Because sellers know the business better than anyone, they are often in the best position to protect their investment.

A Better Way to Close Deals

Seller financing isn’t just a tool to complete a transaction—it’s a strategic way to maximize value and create income.

By thinking like an investor and structuring the deal properly, sellers can turn part of the sale into a long-term financial asset.

If you want to learn more about creative private investments, check out my book Invest Local — available on Amazon or as a PDF from DCBBooklist.com 

Key Takeaways

Seller financing can transform a business sale into a reliable income stream when structured properly. By evaluating the buyer and prioritizing sustainable cash flow, sellers can reduce risk while improving deal success.

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Seller’s Lawyer Killed the Deal (What Went Wrong?)

 

***New Video Alert!

A business broker shares a real story where a seller’s lawyer destroyed a deal at the last minute. Everything looked aligned- buyer ready, due diligence done until legal strategy and poor structure caused chaos.

In this video, I explain what really went wrong, how this could have been prevented, and what brokers, buyers, and sellers must do differently to avoid losing great deals at the finish line.

Watch the video here: https://youtu.be/7togJsoXZyg 

Cheers

See you over on YouTube

David C Barnett

The Easiest Financing Source Most Buyers Forget to Ask For

 When financing falls apart on a deal, it’s often not because the numbers don’t work — it’s because people overlook the simplest source of capital available: the seller.

I recently had an interesting phone call with an equipment leasing broker who specializes in arranging operating and capital leases for heavy equipment, restaurant equipment, and store fixtures. https://youtu.be/LH3FdgmywrA 

He was working on a deal involving a small specialty food store that was shutting down. The business had reached the end of its lease, and all of the equipment was still installed in the space — display cases, coolers, counters, baskets, trays, and all kinds of small items.

A successful food operator in a neighboring town wanted to expand into this location. The brand was strong, the operator had decades of experience, and the opportunity made sense because much of the infrastructure was already in place. Expanding into a fully equipped space dramatically reduces startup costs and risk.

Where the Financing Hit a Wall

The leasing broker was able to arrange financing on all of the major equipment — anything with serial numbers such as refrigerated display cases, freezers, and likely the point-of-sale system.

But the smaller items created a problem.

Trays, baskets, scoops, and small fixtures don’t have serial numbers. They’re easy to move, hard to track, and not permanently attached to the building. From a lender’s perspective, these items don’t make good collateral. If the bank ever had to seize them, they could literally walk out the back door.

As a result, no lender wanted to finance that portion of the equipment package.

The buyer was already going to be stretched putting up the cash for inventory, so the broker called me asking if I had any ideas for how to finance that last piece of the deal.

Installation Value Changes Everything

This immediately reminded me of concepts I use when performing machinery and equipment appraisals — specifically the difference between:

• Fair market value in continued use, and
  
  

• Fair market value removed (liquidation value).
  
  

For many pieces of equipment, a huge portion of the value isn’t the metal itself — it’s the installation.

Think about a large refrigerated cooler. It might be manufactured overseas, shipped, delivered, installed, wired by electricians, and connected to compressors and plumbing. All of that labor and logistics add enormous value.

If the equipment stays in place and continues operating, that value is preserved.

If it gets removed, much of that value disappears instantly.

Once it’s disconnected, hauled away, stored, and eventually sold, you’re now dealing with a fraction of its original value.

The Simple Solution: Seller Financing

My suggestion to the leasing broker was straightforward.

If the big equipment can be financed through leasing companies, then the seller should finance the smaller items directly, just like vendor financing in a business sale.

Even though this isn’t technically goodwill, the seller is protecting the installation value of the equipment. If the deal collapses and the equipment has to be removed, the seller faces storage, transport, and resale losses. The buyer, on the other hand, receives maximum value by keeping everything in place and operational.

By holding a note on the smaller equipment, the seller:

• Protects the value of what they already own
  
  

• Makes the transaction possible
  
  

• Often achieves a higher total recovery than liquidation would provide
  
  

From the buyer’s perspective, it reduces the upfront cash burden and keeps the expansion financially manageable.

Why People Rarely Think of This

One of the most surprising things I’ve observed over the years is how rarely people think of simply asking the seller to finance part of a deal.

It’s often the easiest source of financing available.

If someone owns the assets outright, they can decide to accept payments over time simply by agreeing to it. There’s no bank committee, no rigid underwriting, and no collateral hurdles.

In many cases, seller financing creates a win-win outcome that wouldn’t exist otherwise.

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