Sell a Business Resources
About selling a business by Vested BB
Start thinking about buying an established business if you want to avoid the immense risks involved in starting one. Not everyone wants to start a business from scratch, and buying a business with the infrastructure in place lets you focus on building it up, as opposed to getting a new business off the ground. This is not to say that it’s easy to buy an existing business; it’s a fairly complicated process throughout which you need to know exactly what you’re doing.
First off, decide that you do want to buy before you begin your research. This way you will look at options more carefully. A particular business may not be exactly what you’re looking for, but if you’re sure that you do want to buy, then you won’t brush it off immediately, without first considering how you might grow with it.
Talk to the people in your life who are likely to be affected by the venture. Let them know the hours that you are likely to have to work and the risks involved. You might need their support if you initially go through a rough patch.
Spread the word. The right business for you could be nearer than you expected. Maybe a friend never thought about selling her business until you mentioned that you were looking to buy. It is important to start by knowing what kind of business you’re looking for. Have you always wanted to make guitars? Sell shoes? Run an art gallery? There are so many options available to someone looking to buy a business that unless you know what you enjoy doing, you could spend forever looking through things you could possibly be doing. The internet is an invaluable resource in identifying a business that you want to buy, but only if you know what you’re looking for, so that you don’t get swamped by the available options. Buying an existing business generally makes research easier, since sellers will be helpful to prospective buyers, and willingly provide them with information about running it.
Once you figure out your particular area of interest, think about the size of the business that you want to buy, the location of prospective sellers etc. Know your financial resources so that you don’t waste time looking at businesses that are beyond your reach, even if you have always fantasized about being a ship-builder. Identify your strengths. Are you good at sales? Operations? Look out for a business that is in a position to benefit from your particular strengths. Once you’ve identified a business that you want to buy, make contact with the seller but hire professionals i.e. accountants, attorneys, brokers etc. to take care of different aspects of the purchase.
Allow yourself a gut instinct about the seller and the business. Feel free to ask why they want to sell the business, and evaluate your decision based on their reasons. It might just reassure you that you should go ahead with the deal.
There are many methods of valuing a company, and it is up to the seller to decide how to go about it. Make sure the price is a fair representation of how valuable the company is likely to be to you. It is obviously disadvantageous to you if a non-performing company that is heavy in assets is priced based on the net value of its assets. The asking price is negotiable. Even in a situation where the seller is firm on her price, enquire as to the method of valuation and challenge it if you think it leaves you with an unfair deal. While negotiating, be prepared to challenge the seller with facts and statistics.
Find out what specific concerns the seller has about the deal, and address them. Be sensitive to the fact that selling a business can be an emotional process but at the same time make sure that you don’t end up paying for its sentimental value. Don’t let your lawyer negotiate for you. You know best what you’re looking for, and what’s important to you. By all means take her help to sift through the legal aspects of the agreement, but make sure that you are in charge of the negotiation. To finance the deal, seller financing is probably the best option available to you. You won’t get a bank loan without offering a 100% collateral. The Small Business Administration does offer some financing but only for deals that meet a strict set of criteria.
The good thing about seller financing is that it shows that the seller is being serious and honest about the deal, and is not trying to offload an ailing business onto you. It shows that he has enough faith in the business he is selling to share the risk involved in running it with you. There’s no better way to be sure that a business is really worth buying. Seller financing also allows for far greater flexibility than any other kind of financing.
Most people who start looking for a business to buy never actually end up buying. If your first deal doesn’t come through, don’t let it deter you from looking for other businesses. Learn from the experience and use it to sharpen your skills so that the next time around, you know exactly what you want and how to go about getting it.
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