Buying a business is a lengthy and stressful process. I have simplified the whole sales process by breaking it down into 5 easy steps and I have noted some potential problems to avoid.
Step 1 - Pick a Business
First you must decide what type of business to buy. Consider your personal interests and experiences. Believing in what you are doing is essential to success and will be reflected in your interactions with customers and employees. Pick a company you can be passionate about. Also, sticking with what you know makes things a lot easier as you won’t have to take to time to learn about a new business and industry. Entering into an industry in which you lack experience could lead to problems down the road.
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Step 2 - Know the Regulations
Next you will have to research laws and regulations in the industry you have selected. You will need to find out if you are even eligible to own a business in that industry. For example, if you are considering buying a liquor store and have a criminal background then you will not be able to obtain the necessary liquor license. You want to know you eligibility up front and what you are getting into before investing any further time.
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Step 3 – Choose Your Professional Team
Have a professional team in place- a lawyer, an accountant, and even an industry expert or consultant. They will help you determine if a particular business is a good investment or not.
Step 4 - Review the Financials and the Company
Review the financials. Also, have your professional team review the financials of the company you are considering. Financials will reveal how the business operates and how it makes money. They will also show you areas that need improvement. Taking the time to dig into the financials will help you determine if a company is a healthy investment.
Aside from the financials alone, you will need to review other areas of the business including the facility itself. Is it clean, up to date? Will any necessary equipment need to be repaired or replaced? The current owner can help you answer these questions. The answers provided will determine if you want to go ahead with making an offer and it will help to uncover any potential problems. You may decide the business is not worth your effort or is not the right fit. If you decide to go ahead use the information provided to establish an initial offer.
Step 5 - Close the Deal
The final step to the sales process is closing the deal. This is where you make an offer to the seller. Your initial offer may not be the final number you all agree upon but have a number in mind that you will not go above when negotiating. Don’t be afraid to walk away if the deal is not coming together how you like. In some cases, even after all your research, you and the seller may not be able to agree on a price. However, if you can agree upon a fair price then congratulations you have survived the sales process and bought yourself a business!
About The Author: Peter Siegel, MBA is the Founder & President of BizBen.com. BizBen.com is a website offering businesses for sale and businesses wanted to buy as well as business resources, & articles. He is also the owner of the BizBenNetwork Online Community. Reach him at 866-270-6278 to discuss strategies regarding buying, selling, and financing small to mid-sized businesses.
