8 Things We Wish Every Business Buyer Knew Before Calling Us
When it comes to buying a company, the adage “It’s not personal, it’s business” goes right out the window. Investing life savings, sacrificing a conventional career, recognizing the risks, and developing the relationships necessary to make it a success is about as personal as it gets. It’s emotional. It’s expensive. It’s hard. And it can also be the best decisions you’ve ever made.
All the more reason to thoroughly understand exactly what you (and your business partner and your family) are getting into. Buying a business is one of the most complicated—and rewarding—endeavors the lucky few ever do, and it takes a team of people working together to make it happen, make it worthwhile, and make it enjoyable (yes, enjoyable).
Here are eight things we wish every would-be buyer would know before approaching a seller with an offer.
Make sure you love something about it.
One of the biggest mistakes future business owners make is buying a business they know or care very little about. The success of a business, whether it is a start-up or a takeover, is steeped in the non-stop involvement of its owner. As the new face of the business, you better be smiling—and this is much easier to do if you love what you do or what you are selling (preferably both).
Know your broker’s background.
Many business brokers work in a part-time capacity and close only a few deals per year. Consider this: The Firm Business Brokerage handled 43 transactions in 2016 and has helped a total of 152 buyers find the business of their dreams since 2010. Aligning sellers with prospective buyers isn’t just our full-time job; it’s the reason we get out of bed in the morning.
Know everyone’s name at the table.
You may be buying a business entity, but there are a lot of humans involved in its sale. Learn names, shake hands, and get a good gut read of the room. The better you feel about the people with whom you do business, the smoother the transition will be; you’ll ask better questions, get better answers, and have a better chance of meeting your company milestones successfully.
We can only help you find a business with those listed in our current portfolio.
Our brokerage is retained by the seller. While there is no obligation to buy, there is a benefit to creating a buyer profile so that we pair you up with business listings that match your goals, risk tolerance, and budget.
Tax returns are only a piece of the financial puzzle.
When evaluating a business for purchase, it’s important to work with a broker who can explain the intricacies of the company’s existing financials. Some items claimed by sellers on tax returns will not be claimed by you; things like their personal phone, mileage on their cars, and one-time large purchases that won’t impact financials after the sale.
Get a proper business valuation.
Don’t trust a business valuation completed by the business; it’s essentially like having a mother describe her own child. A professional broker can ensure the valuation is approached with objectivity and transparency; due diligence and underwriting will reveal any skeletons long before pen hits paper, but it’s better to avoid that headache up front.
Secure the right financing.
We won’t tell you how many business deals are threatened by incorrect or insufficient financing. Ensure you can buy the business of your dreams by securing the necessary funds prior to the sale. The Firm’s extensive contacts, strategic partnerships, and resources can help make your dream a reality.
What will your cash flow look like the first year?
When considering a business for purchase, consider what the business looks like right now and what it could look like a year from now. Are there ways you can save on expenses? How will you treat your write-offs and advertising? Are there ways you could increase exposure, marketing space, mass appeal, and product development to the benefit of your new bottom line? Consider these factors in more when determining if you should purchase the business.
The Firm Business Brokerage knows what it means to find the right fit between seller and buyer; some of this is chemistry and some of this a lot of accounting. We’re happy to assist you no matter what side of the table you find yourself (this time). For more information, contact us here.
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