The reasons for buying an existing business can be condensed into three general categories:
1.To reduce some of the uncertainties and unknowns that must be faced when starting a business from the ground up
2.To acquire a business with ongoing operations and already established relationships
3.To obtain an ongoing business at a bargain price—a price below what it would cost to start a new business
Buying a business is a process that takes time.It can sometimes take years to find the right opportunity.
Unfortunately, many buyers want to look at all available options, thinking they’ll recognize what they’re looking for when they see it. That approach usually produces frustration and valuable time and energy are lost.
By preparing a little before you start the process, you are liekly to experience better overall results. The process of discovering and documenting your motivation, lifestyle, expectations, financial statement and résumé will help you develop your acquisition criteria.
Identifying and communicating your acquisition criteria, qualifications and experience will save time and frustration and will place you far ahead of less focused buyers.
Explore below for some helpful tips for your business search process:
Start with a self assessment:
Ask yourself why you want to buy a business. What types of work activities do you like and what kind of lifestyle do you want to pursue? It’s important to understand that there may be more work and longer hours for an owner in some industries. Be sure to include your family in the assessment.
Establish realistic financial expectations:
Determine how much money you need and want to earn. Make sure your expectations are in line with the types of businesses you are targeting and the return they can produce.
Compile your personal financial statement, outlining your assets and liabilities and identifying available cash for your initial investment.
The personal financial statement serves as proof of your financial wherewithal, so be prepared to share this document with the intermediary, lender and/or the seller early in the process.
Sellers want to be sure that their business will continue to be a success. They’re looking for someone with the experience necessary to continue their legacy and take care of the staff.
Ultimately, you’re selling yourself to the current owner(s), the lender and the professionals representing them.
Outline Acquisition Criteria
Define the parameters of your search. Ideally it should include your targeted industries, geographic area and transaction size.
Your acquisition criteria will help you demonstrate your commitment to finding the right business for you..
One of the most important components of searching for and acquiring a business to meet your acquisition objectives is to engage a business intermediary who can assist you with the search, financing, due diligence and closing of a business purchase.
An intermediary will notify you of available companies that meet your criteria and qualifications and usually their fees are covered by the seller so you can enjoy the luxury of their services at no cost.