Buying your own business can be a complicated
procedure.
Throughout the buying process, it's important to keep
an open mind while searching for a business that will fit your needs,
talents, skills and lifestyle. A business broker has many different
types of businesses for you to consider; however, you need to remember
that there is no such thing as that "perfect" business.
Another vital thing to keep in mind is that at some point you must
be able to make the "leap of faith" that separates you
from being a "looker" to a "doer." This isn't
easy, but it must happen if you are ever going to be in business
for yourself. The following discussion of other key issues may help
in the process:
Importance of Information
Understand that in looking at small businesses, you will have to
dig out a lot of information. Small business owners are not known
for their record-keeping. You want to make sure you don't overlook
a "gem" of a business because you don't or won't take
the time it takes to dig out the information you need to make an
informed decision. Try to get a understanding of the real earning
power of the business. Once you have found a business that interests
you, learn as much as you can about that particular industry.
Negotiating the Deal
Understand, going into the deal, that your friendly banker will
tell you his bank is interested in making small business loans;
however, his "story" may change when it comes time to
put his words into action. The vast majority of small business transactions
are financed by the seller. If your credit is good, supply a copy
of your credit report with the offer. The seller may be impressed
enough to accept a lower-than-desired down payment.
Since you can't expect the seller to cut both the
down payment and the full price, decide which is more important
to you. If you are attempting to buy the business with as little
cash as possible, don't try to substantially lower the full price.
On the other hand, if cash is not a problem (this is very seldom
the case), you can attempt to reduce the full price significantly.
Make sure you can afford the debt structure--don't obligate yourself
to making payments to the seller that will not allow you to build
the business and still provide a living for you and your family.
Furthermore, don't try to push the seller to the
wall. You want to have a good relationship with him or her. They
will be teaching you the business and acting as a consultant, at
least for a while. It's all right to negotiate on areas that are
important to you, but don't negotiate over a detail that really
isn't key. Many sales fall apart because either the buyer or the
seller becomes stubborn, usually over some minor detail, and refuses
to bend.
Due Diligence
The responsibility of investigating the business belongs to the
buyer. Don't depend on anyone else to do the work for you. You are
the one who will be working in the business and must ultimately
take responsibility for the decision. There is not much point in
undertaking due diligence until and unless you and the seller have
reached at least a tentative agreement on price and terms. Also,
there usually isn't reason to bring in your outside advisors, if
you are using them, until you reach the due diligence stage. This
is another part of the leap of faith necessary to achieve business
ownership. Outside professionals normally won't tell you that you
should buy the business, nor should you expect them to. They aren't
going to go out on a limb and tell you that you should buy a particular
business; in fact, if pressed for an answer, they will give you
what they consider to the safest one: no. You will want to get your
own answers--an important step for anyone serious about entering
the world of independent business.
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