Here is a scary statistic. 90% of all business buyers never ever complete a sale. The reasons for this are somewhat murky but in simplicty, it largely is a function of lack of education and a failure to follow a process.
Buying a business is a major financial decision and investment and should be approached with the same seriousness you would take in any other major investment. You should get educated, secure professional advice from trusted advisors, and be realistic about your expectations and the outcomes.
With the internet we have a double edged sword. Resources are now available to consumers which provide them with tons of information and advice. However, there are also legions of “experts” and conflicting data that can take a prospective entrepreneur down a rabbit hole of confusion and disappointment.
We recommend a solid 8 step process that is logical, affords you protections and results in a positive outcome if you follow the process step by step and do not bypass the order in the name of expediency or short-term wins.
Time: In a normal market you should find a business to buy in about 3 to 4 months. It is not uncommon for buyers to take 18 to 24 months to find one but I attribute that more often to a “part-time” search approach and or a unrealistic expectations of what the small business market is vs what they think it should be.
Starting Off Right
With over 90% of business searches conducted via web platforms. The key is filtering good from bad, understanding how to read the listings and what terms mean in reality, One of the filters to apply when searching is what is bankable and not bankable. A good broker can assist in this process but get educated on what is a bankable deal and what is not based on the rules of the sba, the ratio’s required, and the size of the deal.
Another Filter is a Self Actualization Exercise and “Reality Check” . What are you good at? What are your strengths, weaknesses, and opportunities. What is the minimum amount of owner benefit you need to earn to meet your financial obligations and what listings do those criteria match up well with.
Between these two exercises the sheer massive volume of businesses should be paired down to a managable number.
Get Educated
No matter what your education or business experience unless you have bought several businesses over and over you are not prepared for this process. Seek out professionals and get educated on the local market, the multiples, and the reality.
Over and over again we see “smart” people get schooled. The educated buyer gets a good deal and the arrogant buyer buys a mess.
Make Sure You Understand the Why
This is not some soft theory. You need to know why you are buying a business and you need to fully understand the scope of the work involved in being an entrepreneur. It is not a 9-5 gig. Anyone who tells you it is lying. No business owner ever really turns off the business. It always is on your mind and not everyone is cut out for it. You and your family need to be prepared for this and if not DO NOT PROCEED.
For this and more on the business buying process visit our websites here and here or listen to our podcasts here and here.