The search process to find and buy the right business is both the most time-consuming and generally frustrating part for individual business buyers. Most business buyers do not have a lot of experience buying businesses and approach the search the wrong way.
Experienced and successful business buyers know the exact fundamentals that any business they consider must-have in place and they zero in on their search accordingly.
While the scattered buyer wastes a ton of time looking, the prepared buyer spends their time on realistic opportunities.
Establish Your Five Golden Rules
You need to compile a set of unbreakable “Golden Rules” that you can stress test with any prospective business for sale. These rules are entirely personal and there are no right or wrong ones. However, you must be reasonable.
Make a list of all the key fundamentals business must have for you to even consider looking at it further. This should be the list that you use as your first step, and is your guiding set of principles to either say a quick “no” or “maybe.”
Here are my rules, which are personal to me, but will give you some help as you think about yours:
- The business must be sales and marketing driven (versus a manufacturing business for example where operational efficiencies may be key)
- It must have an element of exclusivity either in its products (something unique) or in the geographical area it services
- Demand for the products/services must be in place (a ready market willing to buy)
- High profit margins
- The business does not compete solely on price (this is not a sustainable model in my opinion)
The key is the list must be personal to you, there are no wrong answers.
To assemble your list, write down all the key components a business must have that you can think of as being critical and unbreakable. Your list may be longer than five so narrow it down by prioritizing. The list may evolve for new buyers, but the goal is to establish one that you adhere to and do not breach.
Once your list is in place, then it is time to begin your search. Once you have your top five and you stress test every potential business against them, you will cut through all the clutter and quickly narrow down the businesses to ones that make sense for you to consider.
If you would like help in getting started with your search, allow me to be of assistance.
Steve Niehaus, MBA, CBI, CM&AP