Buy a business and be in control of your livelihood. When you buy a business, the risk of business failure is reduced since an existing business has history, trained employees, processes and procedures in place, customers, suppliers, and an existing customer base.
Some buyers spend too much time exploring too many options because they do not approach it with a plan. This often extends the timeframe needed to buy a business.
A step-by-step approach to buying a business:
Ask yourself some key questions:
Why do I want to be a business owner?
What types of activities do I enjoy doing?
What type of lifestyle is important for me? Note: You will want to be sure to include your family as part of this assessment.
Establish a team of professional business advisors. An attorney and accountant will be needed in the process to assist in due diligence as well as construct and/or review the purchase agreement. You will also want to meet with a business broker so that they know you are serious about buying a company. This is a way for you to develop a relationship with them so that you will be “top of mind” when the best opportunities become available. They will also review with you their current available inventory of businesses for sale that meet your criteria and qualifications. Business brokers will guide you through each step of the process of buying a new business, including but not limited to, identifying a business that fits your criteria, making an offer to purchase, obtaining the necessary financing, and completing transaction. You want to make sure that you use business advisors that work with similar size businesses as your target acquisition since there is a difference between large and small businesses. Though advisors will help you buy a business, don’t expect them to say "yes" if you ask them if you should or should not buy a business. They would open themselves up to liability if you bought a business on their recommendation and you failed. The easiest way for them to protect themselves is to not make a recommendation. You need to make the ultimate decision realizing that no business is a perfect business. Business brokers also have professional advisor contacts that can help when buying a business. Since the business seller is often the one paying the fee for the business broker, this is often a free service that a business broker provides to the business buyer.
Consider your personal financial situation. Be sure to carefully consider how much money you need and how much you want to earn. Your expectations need to be realistic Some people say you shouldn’t “buy a job” when you buy a business. There is nothing wrong buying a business as a substitute for an income paying job. If you make a similar salary to what you were making employed, though you may have more responsibility as a business owner, you may also have more job security since you are your own boss. In addition, you do not have the ability to sell your position to someone else when you are ready to retire from a corporate employer. You do have the ability to sell your business.
Develop a personal financial statement. Business brokers are hired to screen business buyer prospects. They need to know that you have the financial wherewithal of to buy a business. Lenders will also ask for this if you pursue a business acquisition loan. The personal financial statement should show your assets and liabilities and possibly include a supporting statement from your banker or accountant.
Create a personal profile. The more the seller feels comfortable with you and understands you skills and background, the better chance that the seller will agree to seller finance a transaction. Sellers want to be sure their business will continue to be successful with a new buyer. They want to find a buyer who has experience and will take care of the company's employees. A personal profile will help sell you to the current business owner and the advisors that represent the seller.
Establish your acquisition criteria. A focused approach is best when working with a business broker. Such details as geographic requirements, transaction size, and down payment comfort level are important. A business broker needs to have a reason to keep you in mind when new opportunities become available. The closer the relationship that you have with the business broker; the better they will be in finding you a match.
If you want to effectively buy a business, you want the business broker to be selling you to the seller. It is important that you demonstrate that you are a qualified, motivated buyer. Being prepared and serious about your search is an important initial step. Responsiveness and timely follow-up are other recommendations to show your seriousness.