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How to Learn About Any Business and Find Out Which One Suits You Best

Answers to help you buy the right business

Written By: dan@proaceintl.com

One of the biggest mistakes the no-cash buyer can make is to be caught up in the excitement of having found what looks like the ideal business. This can result in taking short cuts in evaluating the business' worth in order to get the deal sealed-unless the seller gets impatient and sells it to someone else. Make sure to evaluate and thoroughly research the reasons why the business is being sold. You are probably doing the seller a favor by taking the business out of his hands; he'll accept any strategic maneuvers you offer him.
 
You might think at that point that all your business deals will be successful. Well, an easy purchase can bring suspicion; be discreet while conducting your research. Don't make it too obvious. Remember that you will not offend a serious seller if you exhibit the professionalism of a serious buyer. So do not compromise any essential acquisition standards. Once you do the deal, that "baby" is yours. .and you want to make sure it's a healthy one before you sign any ownership papers.
 
Question: Is there any checklist I should follow while evaluating the business I am interested in?
 
Answer: Developing an acquisition strategy is a business planning exercise that defines the specific criteria to be applied in searching for and screening acquisition candidates (these candidates are businesses, not individuals). There are many reasons for this planning exercise: it gives you a frame of reference to evaluate acquisition candidates, it keeps you from wasting time on acquisitions that cannot be completed, and it helps you avoid acquisitions you will later regret. A defined acquisition strategy demonstrates that you know what you want to do, making it easier to retain qualified outside advisors as part of your acquisition team. These advisors don't like wasting time on unsuccessful transactions, and you don't want to waste advisory fees on poorly thought-out transactions. There are important issues to tackle and information to seek. A firm looking to acquire another company needs to focus on its current operations and identify current strengths and weaknesses. There should an analysis of future industry growth potential and trends within the existing business sectors, and an analysis of the competition.
 
Next, review past acquisitions and internal growth of the company, noting success and failures, and identify the reasons for those successes and failures. Based on the analysis, you should now outline your reasons for embarking on an acquisition program, determine financial resources available and define the characteristic of the desired acquisition, and finally define your company's policy regarding financial intermediaries.
 
Question: How can I locate the right business?
 
Answer: There is a few ways to locate the business that you are interested in.

Print Advertising:
Business opportunity classified ads are a viable way to advertise a business for sale. Many ads are placed by intermediaries (business brokers or merger and acquisition specialists), but some are placed directly by business owners. The larger local newspapers are the best source of such ads for smaller, privately-held businesses. Sundays are generally the most popular days for these ads. Business opportunity ads, whether for small or large businesses, usually describe the business in several short phrases, keeping its identity anonymous, and list a phone number to call or post office box for reply. The ad should be worded to demonstrate the business's best qualities, (both financial and non-financial) and many include a qualifying statement describing the kind of cash investment or experience required. A telephone number in the ad will draw more responses than a post office box number, but may not permit the anonymity of a post office box.

Trade Sources:
Trade sources can be a viable source of information on businesses for sale. Key people within an industry or in companies on the periphery of the industry, such as suppliers, often know when businesses come up for sale and may be aware of potential buyers. Every industry has a trade association and trade association publications can do a good job of communicating the sale of a business in their industry.

Intermediaries:
Business opportunity intermediaries generally can be divided into two groups:
1) business brokers
2) merger and acquisition specialists
 
The differences between these two groups are subtle, but in general, business brokers primarily handle the smaller businesses, and merger and acquisition specialists handle the larger middle-market companies. Both groups usually ask for a contract with a 180 day period or a more exclusive right to sell the business.
 
Question: Are there other ways to find the right business?
 
Answer: Definitely. Another good way to increase your chances in locating the right business for you is to advertise your interest in buying. You'll often read or notice that most advertising is undertaken by sellers, so it can be even more effective for you to advertise your desire to buy a business. Advertising will allow you to reach many prospects that other avenues cannot present.

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