Ten Tips for Business Buyers

August 19, 2014

Image of Business and Money


Risky Business

There is risk as well as reward in being a business owner. If you are the risk averse then business ownership may not be for you. Before you even begin to look for a business, decide if you are willing to accept the higher level of risk involved in entrepreneurship.

Know your strengths

Determine the type of business that best suits your abilities. Know your strengths and look for a business that will best utilize them. Don’t try to do something outside your comfort zone. We are best at doing the things we enjoy.

Select a business broker

Your next step should be to find a qualified business broker to help you in your search. A good business broker will be an invaluable guide through the process.

Chose your advisors well

Uncle David might be an attorney. But does he have experience with business acquisition transactions? Make sure that the professionals you choose to help you have the appropriate experience. I have seen deals go under because of bad advice from well meaning people.

Make a fair offer

If you find a business you like. Do your research, decide on a fair price and make your offer. By all means leave yourself a little room to negotiate. But don’t lowball the seller. A lowball offer will only insult the seller and convince him/her that you are not serious.

Trust but verify

During the negotiation phase buyers should trust the numbers being presented by the seller. After a deal has been struck however it’s time to dig into the books. Make sure you perform a thorough due diligence. Be polite but persistent. If the numbers don’t add up you can either renegotiate the deal or back out altogether.

Look for improvements

Look for the things the seller does not do well. This can be a big positive for you. You are paying for how the business looks today. If you can make improvements to its operation and bottom line – that belongs to you.

Negotiate the lease

Most businesses are sold without the property. As such you will need to complete a lease assignment or renegotiate a new lease with the landlord. Decide what your goals are in advance. If the location of the business is critical then you will want to negotiate the longest lease possible (ask for end of lease options). If on the other hand you plan on relocating the business then a short term lease will better suit your needs.

If it’s not broken don’t fix it

If you are purchasing a well run and successful business think twice before making any changes. In fact I recommend buyers wait at least six months before they make changes to the operation. Of course if you are buying a “fixer upper” then you may want to start making changes right away.

Prepare to sell

The day you close is the day you should start thinking about selling your business. Always run the business with the thought in mind that one day you will need to sell it. The earlier you start the better the position you will be in when that day arrives.

Quorum Business Advisors, LLC