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Posted: Saturday, May 30, 2015 10:45 am
One way that you can break into entrepreneurship is to buy an existing business.
But according to author Richard Parker, 90 percent of people who begin the search for a business to buy never complete the purchase. Parker reports that the major stumbling blocks are inexperience, deciding on the “right” business and a lack of expert advice.
SCORE mentors can help to fill the gap in expert advice. SCORE blogger Peter Siegel lists steps you can take to reach success in the quest to buy a business:
SCORE mentors can help to fill the gap in expert advice. SCORE blogger Peter Siegel lists steps you can take to reach success in the quest to buy a business:
Set your search criteria: be sure you know the type, size and location of business you would like to buy. There are more business buyers than sellers in the market, and you can set yourself apart as a motivated buyer by knowing those criteria.
Plan a down payment: many times, you will need to put down 30 to 100 percent of the purchase price as a down payment on a business. The size of your down payment determines the size of business you can buy. Decide in advance if you are willing to pledge collateral in other real estate you own (such as a home) in return for owner financing. It’s also a good idea to be pre-approved/reviewed for an SBA loan or other financing options before writing any offers.
Keep moving forward: delay kills deals. Whether it is contract negotiation, a restructured lease or allocation of purchase price, don’t let any situation sit too long. Communicate often and make timely progress on negotiations.
Respect confidentiality: to get any detailed information about a business for sale, you will likely need to sign a confidentiality agreement. Respect this part of the process. Be aware that there are legal ramifications if you are identified as the source of a leak that a business is offered for sale.
Line up your professional team: be sure that your CPA, lender, attorney, SCORE mentor and escrow services are in place to support you throughout the process of buying a business.
Make an offer: it is easy to be timid when it comes to signing a purchase agreement. But the offer is just a starting point that usually “locks out” other potential buyers, giving you time to look at business records and do other research during the Due Diligence period.
You can become one of the 10 percent who succeed in buying a business.
Mark your calendar for the Dec. 8 SCORE workshop “How to Buy or Sell a Small Business.” You’ll learn about the “skeletons” a buyer must identify, tax implications for buyers and sellers, how to set the value of a business and things that can kill a buy-sell deal.
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