Some useful tips to keep in mind when buying or selling a business
I have supported a number of business owners in the sale of their businesses. I have also assisted many businesses that had bought the business they were running. I have also worked closely with business brokers who are a critical player in the buying and selling of businesses.
Judy (my wife) and I also recently purchased a business in late 2017.
I have learned a great deal during these years of work. Here are a few tips I can share:
- Buying a business is a serious option to be considered if you want to get into business. Starting from scratch can take a long time.
- Buying a franchise is a good option for those less experienced in business. It may be frustrating for an experienced business person keen to operate with complete flexibility.
- Use the experts. If you are selling use a broker. I have been involved with owners wanting to sell themselves and avoid the cost of a commission – this never ends well.
- If you are a buying, you are on the back foot from the moment you start. The broker will be representing the seller. The seller knows everything about the business while the buyer no matter how astute will see only some of the business.
- As a buyer you will likely have to make a counter offer before being allowed to see any detail about the business – this is how most brokers work. Basically, you are offering a price knowing almost nothing about the business (A process I am don’t agree with but its how most brokers work).
- As a buyer do your due diligence. Dig deeply. Ask for as much information as you need and be prepared to walk away.
- As the seller, don’t go to market unless you are ready to sell. You need to be emotionally ready to part with the business and also have everything in place to impress the buyer.
- Get a good lawyer.
- Learn the basics of business valuation. This is not simple. Is a combination of both science, and art. This is a separate blog in its own right!!
- If the business is not valued correctly the banks won’t fund it.
- If they do lend you the money and you paid too much your new business won’t generate the profits to cover the debt and you’ll be battling from the day you takeover and every day there after
And there is much more I could discuss but let’s leave it for now. If you are selling your broker is a critical advisor. As a buyer you are on your own so seek out some help. I’d love to share my experience over a coffee if you are thinking about selling or especially if you are buying. Get in touch below: