There is no easy way to say it but purchasing a business is a lot of work!
No matter what I write, what I prep buyers for, there are many times that a buyer will just call it quits, stop looking, maybe try another broker… so it makes sense that around 90% +/- of buyers will never end up purchasing a business.
I am currently working with a client that needs to purchase a business. He comes from a retail executive position, has been open to the process as to what type of business he wants to purchase, has been extremely patient and has been everything that you want when working with someone.
So I asked him about the process. What are your thoughts over the first four months of your search? What advice would you give someone? This was his response:
There is such a wide variety of businesses, and what seems like such a wide variety of brokers presenting those businesses, that the task of finding the “right business” can seem daunting, if not impossible. It is no wonder that so many people give up and become part of the 90% of lookers that end up not buying. So having a positive attitude and belief that the right business will come along, and not giving up when times get tough, is critical in buying the “right business”.
With so much research needed to filter through the different businesses, one can easily get analysis paralysis as every business is a bit like buying a used car. A used car is not new, so it’s not perfect. Therefore you end up spending a lot of time looking for what isn’t right about it. Does “the car” have a little cosmetic damage that can be fixed fairly easily, or does it have a major engine issue that is going to cause problems and cost a lot of money to fix. Is it too expensive or simply not worth the price?
The challenge is to find a good “used car” (business) and make it great, not a bad one to try to make good. And just like when buying a used car, I have learned that there just is no perfect business, and if there is anything close it is bought very quickly. So if there are any major doubts about a particular business meeting the criteria of being “good” with the potential to be “great”, it’s time to move on to the next business. But at the same time, when you find the right business, it is time to act!
Having the right support to get through it all is critical too. Not only support from family and friends, but having the support of the right broker. I have learned that there are different levels of experience and different levels of work ethics of brokers that can also make the process more frustrating than it needs to be. Having patience and persistence when calls aren’t returned, or information is not provided, or the information is less than optimal to make a decision to move forward, is key to finding the right business. While you can choose the right broker that will help you buy, and you should, you can’t do much about those brokers that are listing a business except be patient and persistent, and work closely with your broker to get what you need.
I have heard it takes about 6 months to find and buy the right business. As I approach the end of my 4th month, I look forward to taking the next step of negotiating an offer on that “right business”.
Hopefully some information from a buyer currently going through the process will be helpful to anyone looking to purchase a business. The main piece of advice that we got from him is really to be patient. Unfortunately some of the businesses are not always what they appear to be as there are subjective add backs, declining sales, maybe a large cash influx is needed for equipment, sometimes we do not get the necessary information to make a proper decision or even get any information at all as there have been instances where it is the brokers fault and other times when it is the sellers fault. And the very first business we looked at he believes that was the business he wanted to purchase but we did not move quick enough so you do have to move very quick when you find that business.
The good news is that it appears we are closing in on a business for him to purchase so I look forward to part 2 and going through his perspective on the contract, due diligence process and any other adventures that may happen. Then on to part 3 which we will wrap it up post closing and will go over the closing, the training period and go over the business he purchased and why.
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