Podcast: Play in new window | Download
Subscribe: Google Podcasts | Spotify | RSS
It was 2003. I had spent my first 6 years in the business world job hopping through corporate America and was suddenly miserable beyond belief. I had a great job with one of the largest corporations in the world. All I had to do was keep my head down, work hard, and I would eventually be an executive. Yet, I was miserable.
I wanted something more. I wanted a life. I wanted to own and operate my own small business. That’s when I set out to purchase a business. I was 28 and didn’t know so much as the first step to take. All I knew was I wanted out of the corporate grind and wanted to enter the world of entrepreneurship.
I learned a lot during the year I purchased my company. I learned most deals die before they succeed. I learned it can be an emotional roller coaster. I learned you don’t have to have a lot of money to buy a business.
All you need is a willing seller, a compelling story as to why you are the right buyer and an ability to convince the seller they will get their money. That’s what I did. You can read about the entire experience in my book ‘Push Play: Taking Your Life Off Pause’ where I document my escape from corporate America. I give the good, the bad and the ugly of the whole experience.
Here are some basics of purchasing a small business. While every deal is different, there are some universal practices to buying a business. The one thing I advise all my advisory clients who want to buy a business is this-make sure you really want to be a small business owner.
Often it sounds better to be an entrepreneur than the reality of actually being one. I always use the analogy of when I decided I might want to buy a Harley Davidson Sportster. I borrowed a friend’s and went to our church parking lot to ride it for the first time. I laid it over inside of 2 minutes. I never got on a bike again. The thought of riding a Harley was much better than the reality.
That said, let’s say you have already flipped the switch in your mind. You are an entrepreneur and want to buy a revenue stream. Good for you. Let’s talk some basics.
As an entrepreneur, you always have to be on the lookout for new opportunities. One way to do this is to purchase an existing business. This can be a great way to get your foot in the door of a new industry or market, and it can also provide some instant revenue. Here are three easy steps to follow when purchasing a business: (1) due diligence, (2) negotiation, and (3) financing. Let’s take a closer look at each of these steps.
Research the business you want to purchase and make sure it’s a good fit for you
Purchasing a business is an exciting but risky undertaking. The sales process often requires salesmanship as owners are looking to maximize the sale price, while buyers must practice patience to keep their objectives top of mind without being taken advantage of in the deal. When considering a business, prospective buyers should be sure to communicate with current and past owners to gather certain key pieces of information that can help determine if it is a good fit or not; things like financial performance, customer satisfaction ratings, and reputation within the industry. Exploring these potential risks can help minimize getting into trouble down the road if salesmanship outpaces communication too much during the purchase.
Find out how much the business is worth and get financing in place
When determining the worth of a business, family, friends, and self-investment through 401(k)s can be great sources of finance. Banks can also be a great option when looking for financial support. Banks tend to have more in-depth knowledge and experience with business investments, so it is wise to do proper research before making a decision on where to best allocate funds. Doing this will ensure that financing is attainable and will give the business the best chance of success.
Negotiate the purchase price with the seller and close the deal
Negotiating the purchase price with the seller is one of the most important stages of sealing the deal. It requires salesmanship, relationship building, and a certain finesse which make it complex in nature. Making sure you are both on the same page and understanding each other’s opinions requires respect, thoughtfulness and a good personality in order to facilitate the transaction. Negotiating a sale can be difficult but if done right, can be just as rewarding as closing it.
If you’re thinking of buying a business, there are a few things you should keep in mind. First, do your research to make sure the business is a good fit for you. Second, find out how much the business is worth and get financing in place. Finally, negotiate the purchase price with the seller and close the deal. By following these steps, you’ll be on your way to owning a successful business. Good luck!
Jason Wright is the Founder and CEO of Texas Titan Media. He is the host of the Jason Wright Show a self-improvement podcast focused on entrepreneurship and health.
Follow him on Insta @jasonwrightnow
Subscribe to his newsletter The Vitruvian Letter HERE