Remember the good old TV series “Mission Impossible”, the team who always got their man, well you can get your man too…or, should I say business. It’s similar to selling your house where location, location, location is the mantra…but in the case of buying a business it’s planning, planning, and planning. Yes, it’s possible to find a pretty good business, but you’re going to expend a lot of sweat, blood and tears in the process. So, before accepting the challenge, have a clear plan of action before embarking on this mission. As with all journeys, you’ll need a comprehensive roadmap. It’s no use waking up one Monday morning and saying to your self, “Oh! I think I’ll try and find my dream business today”. This is a recipe for barrels of frustration and nothing to show for it, except a depleted bank balance.
So, how do you start the ball rolling, so to speak? Well, first of all you’ll need to know what skills you possess and what type of business would suit you. There’s no point in looking for a business that doesn’t match your skill set, talents and innate capabilities. For example, don’t go looking for a high technology software development business if your background is as a tool and die operator, it just won’t work. If you want to buy a great business you’ll need to reconcile yourself to the fact that this is going to take time, effort and money to pull it off. But the more prepared you are, the easier it’s going to be to weed out the wheat from the chaff. Even if you do find a really great business, it won’t be perfect, as nothing in this world is perfect, so make a resolution now not drive yourself or the seller insane as you undertake all the due diligence activities required.
Next you’ll need to establish a time line and understand the personal financial consequences of your actions and decisions. If you are gainfully employed during your search this will put a strain on you and your immediate family, who after all will be impacted too. It could take a year or even more to find exactly what you are seeking, so pace yourself and don’t forget to consult close friends, family and especially professionals, such as a financial advisor, legal expert and professional business broker, who are members of the International Business Brokers Association and Certified Business Intermediaries, they will know the small business market and can advise you in your search, but make sure you only work with high integrity brokers who are certified. I have worked with a number of prospective buyers, who in the past have come to me after a series of disasters with non-qualified business brokers, and believe me they wasted considerable time and money. In a number of cases they also lost their earnest deposits. However, if as a potential buyer you have already sold an existing business and have a financial cushion to fall back on, this will allow you a degree of luxury and possibly put you in a better bargaining position in future.
It’s going to take you a couple of months to do the necessary research to put a business search execution plan together, so spend the time wisely to do thorough research. Don’t forget, this is a job you are probably buying, not just a business. If you do decide to venture outside your comfort zone, you had better make sure you know how to run such a business, which may not be familiar to you. Get all the information you can and even talk with owners of such businesses, if you can do this without compromising your position as a potential buyer, all well and good. Having a handle on the financial metrics of any potential business you’d like to buy will enable you to develop a sound business plan as part of the process for financing the acquisition. Nowadays, banks will demand a business plan and expect you have a clear vision for the business you are thinking of acquiring. Since the banking crisis, lending rules have now tightened and banks are no longer willing to take anything on faith, especially for SBA type of loans. Also, keep in mind the owner of the business you may be considering buying has a vested interest in helping you flesh out your business plan, but don’t forget it’s your plan not theirs. Make sure the plan accurately reflects the facts of the business.
As part of your planning process, you’ll need to be prepared for questions from professionals, especially from the seller themselves and the seller’s business broker. The seller will want to know how familiar you are with his type of business and your plans for the future, especially if he or she intends to offer seller financing, as their surety for repayment is tied to your competence and ability to run the business. The seller will likely demand a resume from you as a level of proof to show background knowledge and experience. High on the list will be the owners employees, as most business owners are very protective of their loyal workers. Any hint from you that you might clean house or affect their livelihood in anyway after you have acquired the business, will be grounds for rejection. On the other hand, the seller’s business broker will be more interested in your ability to pay for the business. More often than not, a down payment is required, so the broker will want proof that you have the necessary funds. Many buyers try to weasel word their way out of this question, especially if they are light on funds, but sooner or later the truth will have to come out, so be honest with your answer.
When you have a clear idea of what your needs will be and a comprehensive profile of you as the buyer, your next planning step is determining how you find businesses for sale. There are numerous industry web sites catering specifically to buying or selling a business that can save you considerable time and enable you to home in on those that meet your criteria. Sites, such as Biz Buy Sell at www.bizbuysell.com, Business for Sales at www.businesseforsale.com, and Merger Networks at www.mergernetworks.com, plus a professional association site, such as the New York Association of Business Brokers at www.nyabb.org, are good places to start. They are rich in businesses across a broad range of industries. Once you get on these sites, it is intuitive how to do a search and you will get pretty skilled after a short while. Make sure you keep a folder of potential businesses, as you will not remember them all as you build your portfolio of the most attractive ones. Organization is the key to being efficient and effective in your search.
Good luck with your search and don’t forget, nothing happens unless you devote the time, apply your creative ideas, and put in the necessary hard work.