What is the process of buying a business?
Buying a business is a time-consuming process. It can sometimes take years to find the right opportunity. Although this article focuses on buying a business, understanding the Buyer process can make the transaction more manageable for the Seller. Hence, my Golden Rule: Put your feet in the shoes of the other party.
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 wastes valuable time and energy, and can lead to frustration, ultimately ending the search. Or the potential Buyer may miss out on great opportunities because they weren’t found early enough, or they weren’t ready to move forward with a purchase.
Key steps to follow in 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 essential to recognize that in certain industries, owners may be required to work more hours and undertake additional tasks. Be sure to include your family in the assessment.
- Establish financial expectations – Determine how much money you need and want to earn. Ensure your expectations align with the types of businesses you are targeting and the returns they can generate.
- Put together a Personal Financial Statement – Outline your assets and liabilities. Identify what you can use for your initial investment. The Personal Financial Statement serves as proof of your financial wherewithal; therefore, be prepared to share this document with the Seller’s intermediary.
- Update your résumé – Sellers want to ensure that their business will continue to be successful. They’re seeking someone with the necessary experience to continue their legacy and care for the staff. Ultimately, you’re selling yourself to the current owner(s), the lender, and the professionals representing them.
- Outline your 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.
- Search multiple sources and enlist help – Let your professional advisors (e.g., an attorney, accountant, or financial planner) know that you are seeking a business opportunity. Most importantly, contact business intermediaries who represent businesses within your targeted market. They will notify you of available companies that meet your criteria and qualifications.
Who pays for the service?
Most business brokers or intermediaries are paid by the Seller, which means you can enjoy their services at no cost. If you are buying a business in California, the broker is also responsible for assisting the Buyer with all their requests for information.
When interested in a business, you want the business intermediary to be selling you to the Seller. Prove to them that you have the qualifications and motivation by preparing for your search.
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.
If you have a question about selling or buying your business, call Andrew today at (916) 570 2674.
This article is reprinted as a courtesy of the International Business Brokers Association® (IBBA.) IBBA is the largest international, non-profit association operating exclusively for the benefit of people and firms engaged in the various aspects of business brokerage and mergers and acquisitions. IBBA® has 1,950 members worldwide, with corporate headquarters in Chicago, Illinois.
