Do's and Don'ts of buying a business

Looking to Buy a Business? Dos and Don’ts.

If you are looking to buy a business and plan to call a business broker soon, here are some things to do and things to avoid. We are in the midst of a seller’s market so adhering to these recommendations can help you be better positioned to achieve your goals. Additionally, it is always important to make a good first impression and build trust from the outset of the process.

Do:

  1. Be reasonable and respectful. Everyone is busy. Asking for something that is not reasonable, such as no money down to buy a business will not serve you well. Requests like these, and we see them, waste everyone’s time. Being respectful of time is especially important in today’s market so it is important to be responsive or sellers will move on to another qualified buyer.
  2. Define a list of the industries you are interested in based on your experience and background. Experience increasingly matters today to sellers and lenders. The days of buying a business with no related experience are more difficult. Adjust your search accordingly and, as business brokers, we can focus our efforts to work with you.
  3. Be prepared to be transparent about your finances right away. With so much demand for a good business today, most experienced business brokers are not going to waste time on buyers who can’t show how they are going to pay for a business. Better yet, have a prequalification letter from a preferred SBA lender. Being prepared shows you are ready to buy and that you are serious in moving forward.

Don’t:

  1. Hold back on sharing your financials. You will not be considered a qualified seller if financials are not shared. I remind any buyer that to buy a house, your real estate broker will make sure you are prequalified to look at houses to buy. It is the same concept in buying a business. We want buyers with committed capital or a lender prequalification that they can share.
  2. Position yourself as a viable buyer for businesses in industries where you lack licenses, certifications or experience required. For example, a specific niche trade (e.g., HVAC or plumbing) where it will take 4,000 hours to get your license. You are better off to play to your background and strengths or at a minimum have a defined plan of how you would be perceived as a qualified buyer.

Today’s market is a seller’s market. While that may change over time, today there are more buyers interested in acquiring a business for a wide range of reasons. With the current lack of quality business on the market for sale, buyers are finding themselves in a highly competitive situation for most businesses. The start of this year reinforces the importance for buyers to be prepared to submit a strong offer, have secured financing, and be committed to being responsive throughout the process.

Put your best foot forward and you increase your chances of finding the right business aligned to your goals.

Contact us.