Tips on Buying

Individual buyers face exciting but sometimes overwhelming challenges as they move toward business ownership. Here are some important preparations to make:

• Check your motivation. Are you and your family prepared for the demands of owning your own business?
• Prepare a net worth statement to qualify with brokers to see businesses, secure loan financing and obtain credit from suppliers.
• Decide how much income you need to generate.
• Decide how much money you are willing to invest.
• Examine your strengths. What kind of work environment and tasks do you prefer?
• Look for emotional fit. A new business requires commitment, so it must be something you enjoy.
• Determine value. A company is priced right when its earnings pay you a good salary, service the debt and provide a cushion in case the business does not perform as well as expected.
• Be prepared for a lengthy search. Buying a business can take a year or more. It can be more difficult than finding a job, so make sure you’re committed to the idea of owning your own business.
• Tell everyone you are looking for a business to buy. Opportunities can surface almost anywhere.
• Consider only business brokers who belong to state and national professional organizations.
• Use professional advisors. Typically, brokers can recommend accountants and attorneys familiar with the process of purchasing a business.
• Corporate buyers have equally important tasks to perform before taking over another business. Among them:
  • Develop an acquisitions strategy. Are you looking for complementary products or services? Do you want to enter a new geographic area? How will you manage an acquisition? What minimum and maximum size company will you consider? Can you manage the process internally or should you hire a broker to help?
  • Package yourself. Buying a good business is highly competitive and you must convince sellers you’re worth doing business with. Money, although important, does not distinguish you from other qualified buyers. Consider preparing materials (even a brochure) that describe your company and entice a seller to sell to you.
  • Make sure management is in place to run the new business.
  • Arrange financing.
  • Line up legal advisors.