“What business should I buy?”
I can't answer the above question because the only person who can solve it is the buyer. However, I can suggest a number of steps a buyer should take to help ensure that they will be happy with their decision.
For starters, buyers need to take an honest inventory of
their skills, knowledge and interests. Do they enjoy interacting with the
public or are they more content behind a desk? Are they comfortable with
managing people and making decisions? What technical skills or talents do they
have that they can incorporate into the business?
At this point, buyers shouldn't be too concerned if they
are unable to identify exactly what type of business they're looking for.
Normally, most buyers know what they're not interested in, but really don't
know what would be attractive to them.
This cataloguing also includes a solid understanding of
their financial situation. Buyers need to know how much money they are prepared
to invest and how much they expect to make.
Typically, these two amounts are directly related to on
Secondly, buyers will need to start their search to find
the availability of businesses that match their profile. Scheduling an
appointment with a business broker and reviewing BizBuySell will give buyers a
good sense of what is available.
The next step is often the hardest for many buyers – making
an offer. To show their seriousness, they should stay away from letters of
intent. They are non-binding and are often referred to in our industry as
letters of intent to sue. A well-written offer to purchase will contain all the
language necessary to successfully transfer a business while offering a number
of contingencies that will give the buyer (and the seller) the required
When it comes to negotiating, buyers (and sellers) must
make sure that they focus on the issues that are important to them rather than
details that are not critical. In Fisher and Ury's “Getting To Yes,” they
dedicate a number of chapters on this issue, stressing that successful
negotiations focus on interests, not positions.
Once an offer has been accepted, the next step is for the
buyer to begin their due diligence. There is no point in beginning this until
the buyer and the seller reach an agreement on price, down payment and terms.
This is the point in time where a buyer's accountant comes in and verifies the
seller's cash flow.
Beware that many outside advisors will seldom tell a
buyer they should buy a business, and they shouldn't be expected to do so. If
pressed for an answer, they'll often give the buyer what they consider the
safest one: “No.” In fact, I have rarely met a buyer's accountant who thought
his client didn't pay too much for a business
. Conversely, I've hardly met a seller's accountant who
felt their client sold their business for enough money.
The last step in the process is to bring in a third
disinterested party who will complete the necessary paperwork to ensure a
smooth transition. This includes lien searches, UCC1 filings, contacting
governmental taxing agencies, promissory notes, bills of sale, etc. enabling
the ownership of the business to change hands.
A business broker is a professional that buyers should
turn to for assistance when deciding to buy. They can show the buyer a variety
of businesses that are legitimately interested in selling and help them through
the purchase process.
With plenty of businesses to choose from in today's
market, it is more important than ever for buyers to make sure that their
efforts remain focused on choosing the right business for them.
Buzz Harris, a
Licensed Business Broker with The Liberty Group of Nevada, writes a recurring
Voices column for the Northern Nevada Business Weekly. Contact him at
775-825-3948 or via email at BHarris@TheLibertyGroupofNevada.com.