5 Tips For Buying A Business
Deciding to buy a business is a major step, but how do you know where to start? What should you have prepared? How do you find the businesses for sale? Here are the top 5 tips I think every buyer should read before beginning his or her search for the right opportunity.
1. create your search criteria
Think about your strengths and weaknesses, and decide what attributes of an opportunity matter most to you. Do you have any specialized skills that you think you can add to a business—marketing, technical, sales, managerial, etc.? Are there any skills or elements that you feel need to already be in place with the business? What kind of return on your investment are you hoping for? What is the minimum net profit you require? Beginning to think and ask yourself questions along these lines will help you figure out what types of opportunities best fit you and your goals so that you can be specific in your search. It will also help you search with an end in mind—making a purchase!
2. know your (personal) numbers
Consider your available capital and know your (personal) numbers. Ask yourself—How much of your own personal capital to do you have readily available to leverage for a down payment? How much, if any, additional capital do you need and what are your options? The SBA is great, but not all businesses and/or buyers qualify for SBA funding. Perhaps seller financing is a better option for what you are trying to accomplish. Either way, have a solid idea of what you have readily available before you start to search. This will also help you be narrow your search options. Also, remember that you have to factor in the other associated costs that you will incur with a business transfer—deposits, insurance, licenses, etc. You should consider those associated costs as expenses that will be deducted from your personal capital, as most of them need to be paid before closing. By creating a projected budget of these associated costs before you search, you will not be caught off guard and/or come up as you approach the finish line—the closing table.
3. work with a professional
As you begin to search for opportunities, work with a professional. This will make the transfer process a lot smoother, and he or she will help match you to opportunities that fit your criteria. When seeking out a business broker or business intermediary, ask them what professional organizations they belong to. You also want to ask if business sales are their specialization. Make sure you are working with someone whose expertise is in business sales because he or she is going to know and understand all of the various moving parts that function as part of a business transfer. *Bonus tip: you want to make sure you work with someone who takes the time to help you understand the process. You certainly should respect the person’s time and be reasonable in your expectations, but he or she should never make you feel as though they do not have time to answer your questions or address your concerns.
4. sign an nda and provide a personal financial statement
Be prepared to sign a non-disclosure agreement (NDA) and provide a personal financial statement (PFS) BEFORE you are given any details or proprietary info to review on a business opportunity. If you really want to stand out from other prospective buyers, also provide a resume or executive summary along with your executed NDA and PFS. This shows the business broker or business intermediary that you are serious. Also, respect the confidentiality of the Seller and the opportunity—it helps protect the seller and you as the buyer because it ultimately protects the goodwill of the business.
5. Remember that there’s no such thing as a perfect business
Remember that there’s no such thing as a perfect business! The reason you buy an existing business is to grow and improve on what is already in place. Once you find an opportunity that checks all of your boxes, make an offer.
Though the business acquisition process has a lot of moving parts, it does not have to be overwhelming. By preparing yourself before you start to find businesses to purchase, and by working with the right business broker and/or business intermediary, you will certainly strengthen your chance of becoming the business owner you always dreamed of being!
To explore businesses for sale in Florida, click here. If you are looking for a business broker to work with to help you find the right opportunity in Florida, contact Terri D. Sherman, Business Intermediary with Florida Business Exchange, Inc. (Broker) at 888.925.5055 x 207 and let Terri help you “mind your business today”!