Buying A Business

Exploring buying a business? Looking for resources and what to do next?

You are in the right place.

First, M&A Advisors and Business Brokers generally do not represent buyers. As a prospective buyer, your lending partner and attorney will be your primary advisors. Even more reason to act on our first recommendation – consult a commercial lender who will help you evaluate your profile for buying a business.

Prospective buyers pursue acquiring a business for many reasons. Maybe you are in an unfulfilling job. Maybe you are sick of Corporate America. Maybe you are a 21 year-old student at the University of Washington and the idea of working for someone else sounds _____. Maybe you were laid off in the last year. Maybe you are a seasoned entrepreneur and want to grow your existing business via an add-on acquisition. Or maybe you want to diversify your investment portfolio.

Buying and operating a successful business is, for many, the ultimate American accomplishment.

The rewards and satisfaction can be significant.

Make no mistake though – it involves hard work, practical positivity, and a recognition that you will work on the ‘big stuff’ and the most mind-numbing busy work imaginable..sometimes in the same day.

So where do you start?

1. Get your financial ducks in a row. Do you have capital ready to make a down payment? If you found your “dream business” tomorrow – could you show proof of funds to the seller? We strongly advise you meet with a Commercial lender early and get pre-qualified for financing. Understand the SBA lending process and requirements if you are planning to make use of SBA-insured funds. If you are a “searcher” – have documentation on your sponsors / backers, whether the capital is already raised, and your background. A Personal Financial Statement and up-to-date resume are required to initiate an SBA-insured loan with any commercial lender.
2. Assess your background and refresh your LinkedIn & resume. Sellers (and their advisors, like us) will obviously want to know who you are. This means..have an up-to-date LinkedIn profile and resume. Commercial lenders will have questions if you are a project manager at Amazon and want to buy an electrical contracting business. Background and work history matter – a lot. We frequently see LinkedIn profiles and resumes with different addresses than what a buyer submits in an NDA – this will trigger additional questions.
3. Educate yourself! There are voluminous resources online about the process of buying a business, entrepreneurship, and successfully operating. Show initiative and educate yourself. Connect with others who have successfully bought a business. Organize core documents on your 1) personal financials and 2) work experience.

To begin to learn about business opportunities coming available in your market, create automatic “new listing” notifications on popular business for sale platforms, including:

• BizBuySell
• DealStream
• BusinessesforSale.com
• BusinessBroker.net
• Axial
• BizNexus
• SearchFunder
• BizQuest
• WithKumo.com

After keeping an eye on these for a few weeks you will have a much better understanding of your market, industries seeing activity, and current market multiples.

Next, check out these resources we recommend for prospective buyers:

• Searchfunder.com. Lot of excellent knowledge sharing amongst buyers / searchers, in addition, they host local events in many cities for buyers to connect
• https://diamondfs.com/. Diamond Financial is a national lending firm that “shops“ financing across many lenders. Widely respected, they help buyers evaluate financing options. They offer an initial buyer pre-qualification that we encourage buyers to obtain
• https://resources.liveoakbank.com/blog. Live Oak Bank is also very well respected. They have an outstanding “resource center“ for buyers

Finally:

Save capital. In general, you will need to make a ~10% down payment to acquire a business.

The process of searching for, evaluating, and buying a business is work in and of itself. Be organized, communicative, and do your homework.

So, what are the biggest mistakes business buyers make and what can buyers do to accelerate the buying process? The first mistake, and it is a big one, is that they put all their eggs in one basket and stop prospecting for companies when they find a business they like, often before any analysis.

After that, it’s the following three things:

1. No urgency is created, no timeline set, and thus the buyer gets stuck. The best thing a buyer can do is get the basic information needed to make an offer, make the offer, and keep moving. It could be moving on if a deal can’t be reached or moving to due diligence if a deal is agreed to.
2. Getting bogged down in minutia. There is only one place for minutia and that is after a deal (LOI or Letter of Intent) has been reached. Then minutia manifests itself with financing, due diligence, and drafting of legal documents.
3. Managing risk as there are no perfect businesses and no perfect deals. A buyer can’t go into a defensive mode, they must stay on the offense. It’s how you buy a business and how you grow a business.

M&A Advisors and Business Brokers generally do not represent buyers. As a buyer, your lending partner and attorney will be your primary advisors. All the more reason to act on our first recommendation – consult a commercial lender who will help you evaluate your profile for buying a business.

We wish you the best in your evaluation of business opportunities! And – if you need a referral to a seasoned M&A professional, commercial lender, or transaction attorney – we will gladly point you in the right direction.

If you have not already, please share your email address if you wish to be added to our buyer email list. You can also follow us on LI, FB, or YT to receive updates.