|How Individual Buyers can Start the Process of Buying a Business|
- Planning Phase – Determine the criteria that fits what you’re looking for in a business. Think about industry, location, size, and your personal cash flow needs. Typically these should align with your personal experience, investment philosophy, and financial wherewithal. Additionally, in the planning phase buyers should line up an attorney who is familiar with M&A and an accountant who can assist with tax planning and due diligence. Having your team of professionals lined up and ready heightens credibility in the eyes of sellers.
- Contact Business Brokers – Almost all business brokers will work with buyers to help find the right opportunity for them. We recommend reaching out to a few to see what opportunities they currently have available and what may be in their pipeline. Make sure your broker is clear with you regarding who (buyer or seller) they are representing.
- Meet With A Knowledgeable Lender – Meeting with an experienced lender can help direct a buyer to what size business they may want to focus on buying. A good lender can also provide some perspective on what type of financing structure is typical. Bankers will also work with buyers to help prepare a personal financial statement in order to demonstrate financial wherewithal to sellers. Many first time business buyers will end up utilizing SBA financing (for more information about SBA Loans, please click here for a previous edition of Quazar Quips about the subject). Luckily for buyers in Minnesota, there are many great bankers serving our market for both conventional and SBA needs.
- Explore Listing Sites – For first time buyers, we recommend that they get familiar with the types of deals that are currently available. A couple resources for doing so are bizbuysell.com and bizquest.com.
- Consider Buy-side Representation – If a buyer still has not found the right fit for them after looking at opportunities that are currently out to market, we recommend they consider buy-side representation. With buy-side representation, buyers get the benefit of having an experienced professional advocating on their behalf. Moreover, the buy-side process involves contacting businesses that are not currently for sale, so buyers often get a first look at any businesses that expresses interest in possibly selling. Be aware that not all business brokers offer buy-side representation.
- Be Ready to Submit an Offer – Finding the right fit can take some time, but whenever the opportunity presents itself, buyers need to be ready to submit an offer. Sometimes buyers fail to submit an offer because they are looking for the absolutely perfect deal, which may not exist. There are good deals, but keep in mind there are rarely perfect deals.