Did you know that 9 out of 10 people who decide to buy a business never follow through. Why? Because they simply do not realize how much work is involved.
Buying an existing business can be just as grueling as starting from scratch. Sometimes even more so, since you’re dealing with a seller looking for top dollar.
But the job (and yes, it is a job) of buying a business can be less stressful if you prepare yourself properly, educate yourself, and take all the necessary steps to be certain that you make all the right decisions along the way.
The following seven steps will get you ready to purchase and own your dream business.
1. It will take time, but not forever.
On average it takes 18 months for a buyer to find the dream business. But you can do it in less than 6 months by using a broker, such as Sunbelt Business Brokers-Midwest. However, if you are working full-time, you need to be disciplined. Expect to devote at least 10 hours a week to this project.
2. Starting off right.
Over 70 percent of business purchase decisions are made through the Internet. But with so many business brokers out there, how do you nail it down?
First, take a good look at yourself, your interests, strengths, weaknesses, and passions. This will help you narrow down what will make owning a business a pleasure and not a chore. Remember – don’t try to be something you’re not, and it’s easier to rule out businesses that you don’t want.
Second, consider your finances and look for those businesses that make sense to your investment ability.
Finally, time for another shameless plug, but make Sunbelt Business Brokers-Midwest your starting point, because sellers pay our fees so there is no cost to you.
3. Educate yourself about the process of buying.
You will be facing an onslaught of decisions when buying a business. While an experienced attorney, CPA and business broker will help immensely, you need to learn the process also.
Think of it this way: if you’re going to invest your savings to buy a business, you should invest the time to learn how to buy the right one.
Remember, a well informed and prepared buyer acquires a good business. This is a decision you need to get right the first time.
4. Organize your finances.
You will need to produce a personal financial statement, with a list of all your assets, liabilities, and an outline of your net worth. Also, check your credit reports with Transunion, Expirian, and Equifax for errors. Correct them before a sellers agent finds them.
5. Make sure your family is on board.
This is extremely important, because owning your own business is time and emotionally consuming. Your partner, spouse and family must be on board to deal with the long hours, business cycles, and to provide support.
6. Determine you investment level.
Set an absolute number of cash you are willing to invest. And don’t count on relatives or friends who say “they will help you out.” It rarely happens.
Don’t look for businesses that are out of your price range. About 80 percent of small business purchases include seller financing, which is generally 30-50 percent of the purchase price. So if you have $100,000 to invest, that $2 million business is still out of reach.
This is also the time to sit down with an SBA (Small Business Administration) specialist to look at other avenues of financing. Go to www.SBA.gov for more information.
7. Do you need an Business Broker or M&A Advisor?
Have I already plugged Sunbelt Business Brokers-Midwest? Well here’s why:
- Sellers pay Sunbelt’s fees;
- They have access to a vast database of sellers;
- They walk you through the valuation process;
- They provide you with comparable business valuations;
- They keep the deal moving forward even when obstacles are encountered;
- They are the bearer of bad news to the seller, if necessary;
- Sunbelt helps buyers and sellers of small and mid-sized companies: and
- They ensure all important documents are assembled for closing.
So don’t go out and buy a business on a whim. Realize that it takes work, time, and help to find the best business to fit your lifestyle and life goals.
For more information on buying your own business, check out Richard Parker’s book, “How to Buy a Good Business at a Great Price.”
