It's the time of year when consumers go into full-blown panic mode as they scramble to cross names off their holiday shopping lists. But while last minute shopping is a time-honored tradition in the retail marketplace, spontaneous purchases can be catastrophic for buyers in the business-for-sale marketplace.
Preparing to Buy a Small Business
Savvy business sellers know that preparation is the key to a successful sale. Although it isn't talked about as much, the same holds true for prospective buyers. Industry statistics show that 90 percent of the individuals who begin a business search never complete a deal, largely because they haven't adequately prepared to enter the marketplace.
Buying a business takes time. To achieve a successful business acquisition, you need to understand the process and enter the marketplace prepared to make informed decisions. Here are a few tips to help you get started:
- Adjust Your Expectations. Unfortunately, the average small business buyer hangs around the marketplace for 18 months before calling it quits. However, a properly prepared buyer should be able to complete the process in as little as six months. The key is to adjust your expectations--accept the fact that it's going to take time and effort, then dedicate a certain amount of time each week to the process. You may even want to establish a calendar deadline for completing your search.
- Learn, Learn, Learn. The business-for-sale marketplace can be confusing for first-time buyers, so it's important to learn as much as you can early in the process. At BizBuySell.com, our online marketplace is a useful resource for learning about the types of businesses that are currently available. But you should also talk to professionals (e.g. brokers, lawyers, accountants) and other business owners to gain a clear understanding about the stages and nuances of the buying process. Educational programs like Business Buyers University are geared specifically to help ensure a successful business purchase.
- Get Organized. As you prepare for you search, you'll need to organize your financial records so that you can provide a personal financial statement that details your assets and liabilities. At this stage of the process, it's also critical to determine how much money you have available to invest in a business. Although the seller or a lender may be willing to finance a portion of the business, count on the fact that you will need to fund a significant share of the purchase price using cash, retirement savings or other capital resources.
- Secure Buy-In from Family Members. If your family isn't onboard, your plans to acquire a small business are going nowhere. It's especially important to make sure that your spouse shares your vision for business ownership because after the deal closes, they will be involved in the business whether they like it or not.
- Consider Using Outside Help. Sellers frequently rely on business brokers to help navigate the sale process and negotiate favorable terms. However, brokers can also be beneficial to business buyers. By working with a broker, you gain the advantage of an experienced professional who is fully committed to achieving your purchase goals. You may also want to consider hiring an attorney and accountant with experience in small business acquisitions. Finally, consider contacting your local Small Business Development Center (SBDC) as they offer free help from their thousands of counselors nationwide.
By adequately preparing for your business search, you can lay a foundation for success as a business owner. So do yourself and your business a favor--plan ahead and ensure you are getting the best possible deal for the best possible business fit.