Over the last few years I have had the pleasure of going through two different searches to find and purchase a business. I’m not sure which was more exciting to me – the hunt or closing on the deal. I learned a lot from both searches and wanted to share my experiences, in case you are considering something similar.
What Do You Want To Be When You Grow Up?
For me, one of the hardest things about buying a business was trying to identify which type of business I wanted. Since I grew up in service-oriented companies, I naturally gravitated towards them. Beyond that, I wasn’t sure what I wanted. I went through the SIC directory to see if any specific type caught my eye, but it really didn’t help much, except to identify some industries that I wanted to stay away from. After a lot of time and headaches, I decided that not knowing exactly what I wanted was not a bad thing. Actually, for me, being open-minded helped me buy two of my businesses.
Release The Hounds
Finding the right business to buy is a combination of skill, persistence, and sometimes luck. Once you have narrowed down what you are (or are not) looking for, the really hard work begins. The first thing you should understand about “the search” is that you will probably have a lot of competition. Depending on the market you are searching, many times there are more buyers and sellers. It’s important for you to understand this dynamic in your market. If there are a lot of pursuers for a business, many times you will have to pay a premium for the business or be creative with your offer. If you know people who have recently bought a business in your market, ask them how the process went and what the competition was like. The more informed you are about your market, the better your chances. Here are a few options on how to find available businesses.
An example of a list aggregator is BizBuySell. They provide lists of companies available for sale that you can filter by location, type, etc. If you register, you can also get updates emailed to you. I would sign up for these lists whether you are seriously looking or just thinking about starting a search. You should definitely understand that this is a volume game and that you and a gazillion others will be looking at the same information. However, there is a plethora of great information on these websites. Once you find an industry you are interested in, you can look at different locations outside your market and see how they are priced. This is helpful insight for you when you are contemplating offers.
If you are serious about buying a business, you should absolutely reach out to the brokers in your market. Before you send your first email or make your first call, reach out to your network and find out who the best brokers are in town. You might also find out who you should shy away from. Once you have your short list, reach out to each of them and take the time to introduce yourself and begin developing a relationship. I highly recommend you meet them in person. I’ve always believed that you can build a relationship stronger and faster if you meet in person. Each brokerage will have a slightly different approach to working with clients. Some may offer to help you perform your search – for a fee. While I have not gone with this approach, I know others who have had great success with it. This is a decision you will need to make based on what you are looking for, how fast you want to find your business, and your budget.
If you are in a position to share the news that you are searching for a business, by all means do so. Leverage the network you have built over the years to help you find the business of your dreams. You may be surprised and find the business of your dreams through your network. I would leverage your connections and even look at groups on LinkedIn to identify opportunities. Think of searching for a business like fishing. The bigger the net, the more fish you will catch, and hopefully find one that is a keeper.
Law Of Large Numbers
I hate to be the one to tell you this, but it may take longer than a few days to find the business of your dreams. I’m also sorry to tell you that you may bid on the business of your dreams and lose – multiple times. I will tell you that if you are persistent, you will find more than one of these golden opportunities. I don’t know how many dream businesses I lost or even walked away from (actually, I do), but I picked myself up and kept working hard. Eventually, it paid off.
In my next post I will discuss what happens once your offer is accepted. The fun of due diligence and contract negotiations begins. You also will need to start developing key relationships with your trusted advisers. These are the critical people that will help you finalize your transaction and get you started on the right foot.
If you are thinking about starting the exciting adventure of buying a business, or in the middle of a search and would like to get some valuable feedback on the process, don’t hesitate to contact me. I would be happy to share my successes and failures with you.