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A Buyer's Guide: 7 Tips For Buying A Business

If you have made the decision to buy a business there are several things you need to be aware of that will help put you in the best position possible to make a deal happen. Good businesses attract many buyers and it is therefore vital that you take the right steps to maximize your chances of being the successful party.



1) RESPECT THE SELLER


It is important that as a buyer you respect the seller and the work they have put in to the business. It is perfectly normal to have new ideas about how you would run the business and what you may look to change but do not disparage the seller at any meeting as the business could be their life’s work and any negative comments are likely to put the seller off from dealing with you.


Listen to what the seller has to say as in most cases they know the business better than anybody else and will be your guide through the post-closing transition period.


2) BE PROFESSIONAL


This starts with dressing appropriately when meeting the seller. First impressions count, and so turning up to a meeting dressed in a professional manner shows you are serious about the whole process and comes back to tip number 1 about showing respect to the seller.


Be honest and straightforward when asked any questions about why you want to buy a business, and in particular this business, and always be sure to disclose anything that could be a potential problem in the deal at a later stage, such as a criminal record. Often times any such issues can be overcome but being honest, up front, and professional about these things from the outset is vital.


3) BE READY TO DISCUSS YOUR FINANCES


As a buyer you will have many possible businesses to choose from, but in most cases sellers of a good business will have more than one interested buyer.


To put yourself in the best possible position with the seller you need to show that you are serious about buying the business and that the money is in place for you to do so. Having a personal financial statement prepared is a great step towards proving how serious you are, as is being able to show that you have had talks with potential lenders if you need additional financing.


Simply stating ‘I will get the money’ is not going to put you in a strong position with the seller, especially if other interested parties have provided their financial information.



4) HAVE A POSITIVE GROWTH PLAN FOR THE BUSINESS


Every buyer intends to grow the business they purchase but be sure to have some specific ideas in place for how you would do this. I would not recommend suggesting anything radical at this stage (see tip number 6) but being able to talk in a respectful manner about how you would build on the work already done by the seller shows you have done your homework on the business and could help you to stand out from rival buyers.


Showing you have given considerable thought to the future growth of the business may also help if you are seeking an element of seller financing in the deal, as the seller will want to know the business is in safe hands moving forward.


5) FOLLOW THE PROCESS


There is a process to follow when buying a business and as a buyer you should be sure to trust your broker and other advisors and work through the various stages. Do not try to cut people out of a deal, circumvent a required part of the process, or remove stages altogether.


The process is in place to protect the interests of the parties and the confidentiality of the business, and by trying to act outside of the required parameters it is likely you will lose the deal, and could get a reputation moving forward that hinders you in any subsequent deals you try to make.


Follow the advice of your trusted professionals and avoid trying to be the ‘smartest guy in the room’ if you want the deal to proceed in the best possible way.


6) DON’T ANNOUNCE MAJOR CHANGES


I always advise buyers not to make any major changes within the first 6 months of taking over a business. This time should be spent getting to know the business, and speaking to clients and staff to see where the value truly is – often times it may not be where the buyer thinks!


If you do plan to make a significant change, perhaps in terms of pricing/menus/name/employees/location, then do not announce this prior to taking over the business as it could put the seller off and jeopardize the transaction. It is always best to wait until the deal is done before making any such announcements.


As I have already stated though, I would advise against such big changes so early on as the transition period is hard enough for a buyer without them creating additional challenges for themselves. Spend some time observing the business to be sure you truly know what the ‘secret sauce’ is before making those changes.


7) BE NICE!


This final tip is the most simple but often times the most important. Selling a business can be a big decision for the owner and can lead to a wide range of emotions that a buyer needs to be conscious of.


The seller wants to like the person they are passing the business on to and this is so much easier if you are nice to them. The best deals are not where one party wins and the other loses, but where both parties come away from the deal happy that they were treated fairly. Being nice does not just apply to the seller, but to how you treat employees (who a seller often looks at as ‘family’), suppliers, the landlord, and the team of advisors you work with. A seller may well be watching how potential buyers interact with people before making a final decision on who to sell their business to.

For more information about buying a business call me on 407-989-6893 or visit www.theharrisongroupfl.com

Simon Harrison

The Harrison Group at Rockrose Realty Inc.

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