Choosing the Right Business to Acquire
Once you have decided to buy a business, it is important to find the right business first before worrying about the price. Never base your search criteria simply on finding a good deal because you will find yourself ultimately in a place you don’t want to be. The price must be considered secondary to your personal preferences relating to how you want to spend your time and energy. Remember that you will be spending a great deal of time in the business you choose to buy.
Deciding on the Business to Buy. How do you know which is the right business to buy for you? Unfortunately, there is no perfect formula to help you figure this out. A good place to start is meeting with a business intermediary, who can help guide you through the process and find businesses that meet your criteria. Some of the things you will have to determine are your goals, interests, qualifications, income requirements, geographic preferences, and so on.
Evaluating the Business Intuitively. Once you have determined the general type and size of business that you want to buy, you must evaluate the specific opportunities – for example, if you want to own a retail business with a certain cash flow level. To do this properly you must combine both the intuitive side with the analytical. On the intuitive level, you should begin to picture yourself running the business on a daily basis, and ask yourself if it feels right for you, and if you could see yourself going to the business every day for the next few years.
At the same time, you should brainstorm with a business intermediary or other advisors and the seller about possible changes that would increase revenues, reduce expenses, or otherwise improve the business. Ask the seller what they would do to improve the business. If your visualizations of coming to work here and implementing changes are favorable, you have found the right business.
Making an Initial Offer to Buy the Business. Your offer is based upon what YOU believe the business is worth to buy, which includes a down payment and terms of the payment agreement. Remember that as much as you want to negotiate a good price for the business, do not lowball the seller. More often than not, the seller will take offense and determine that you’re wasting their time taking their business to another potential buyer. Therefore, make a fair offer.
Now that you are this close to realizing your dreams of becoming a business owner, you need to remain patient and diligent as the next and most important step you will be due diligence. This is where you get to request specific information pertaining to the business for your own investigation, and will be the topic of another post.