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How to Buy a Business

Posted by Randy Rinon in Working with a Website Broker Articles

Businesses are bought, sold, and started throughout the world every day, but what is the best way to do it? Buying a business can be a lifechanging decision, your next venture can make all the difference in the rest of your life. Doing it right is pivotal to your future and that’s why connecting with an experienced brokerage is always the best choice.

Most people have never bought a business. That’s just a fact. So, working with someone who does this every day can be the key to understanding the process and making sure that everything gets done right. A business brokerage has preferred accountants, lawyers, and other due diligence partners that bring clarity, accuracy, and comprehensiveness to your buying process.

Why Buy a Business?

Owning a business comes with an array of responsibilities, risks, and rewards. While there are a few ways to go about it, buying a business can be the most effective and promising way to become the owner of a successful and lasting company. Buying a company allows someone with the proper resources to hit the ground running in their dream industry and with an unrivaled sense of confidence.

When buying a company, many savvy new owners take the time to learn from their predecessors to create a seamless transition as well as give the new owner a much stronger potential for enduring growth and success. Additionally, buying a business is a great way to become your own boss and start putting some of your own ideas into practice from the get-go, many unique entrepreneurs can be held back by a lack of resources, standing, or staffing when they are not the owners of their own full-fledged businesses.

Why Not Start a Business

Starting a business comes with a myriad of unknowns. While no one can know the future, 80% of new businesses fail. Acquiring a successful company carries the guarantee of a profitable business model, an existing customer base, and an experienced team that could take a new entrepreneur years to put together.

Looking at it from another angle, some business owners are simply more interested in taking over an established foundation and seeing what they can make out of it. No matter how unique your business ideas are, there are always parts of the business development process that are tedious, dense, and difficult. Much of this can be skirted by simply buying a fully developed brand and getting started with implementing and running the pieces that interest you the most.

Investing in Other Ventures

When considering what to do with your hard-earned money, many strategic investors lean more into stock purchasing and trading than to acquiring a whole new business. However, an established and proven enterprise carries a much larger potential profit as well as presents an opportunity to build out a concept that the new owner can be both passionate about and proud of.

That being said, investing and acquiring companies aren’t mutually exclusive. As profits come in from a business, investing it both back into your company and disbursing it across the stock market can be an incredibly strategic way to continue growing your wealth with a much higher interest rate than what you can get out of a simple savings account.

Buying Bottom Line

There are a multitude of ways to start a business, grow your wealth, or get involved in the industry that you’re most interested in. But none compare to acquiring your own company and hitting the ground running with all the resources available to an established company with immediate cashflow and an experienced team. Building a business from scratch carries an unimaginable amount of risk and barriers, while simply investing your money just can’t match the potential returns of a promising acquisition. If you have the skills, expertise, and capability to find the right company for you and run it effectively, buying a business is the best possible avenue to enduring success.


The Business Buying Process

Understanding the process should be your first step when deciding what company to buy and even if you want to buy one at all. It all starts by deciding what your specific criteria should be. Some buyers look for businesses with specific revenue ranges, others look for particular business models such as White Label, Drop Ship, Inventory; and many buyers simply look for something that personally interests them.

Once you know what your priorities are, we suggest choosing an industry, revenue range, age of business, and business model to look for, the next step is to start looking at what’s out there. There are a multitude of business selling sites and each of them carry their own levels of expertise and advantages. Throughout our more than 20 years of business, we’ve refined and perfected our listings, and our brokers have become incredibly knowledgeable in helping their buyers through the process, be it their first acquisition or simply their newest.


What Kind of Business Should You Buy

When considering what kind of company to buy, consider first what you are interested in. Many new buyers make the mistake of looking only at the bottom line, however, its important to keep in mind that you will be working on this company every day for a significant segment of your life. Choose something that won’t bore you to death.

Next, be sure to do your industry research. No matter how fascinated you may be by a niche offering, understanding the profitability and the growth potential of your target industry can make all the difference in making the crucial decision of which companies to consider buying.

Now all you have to figure out is budget. The goal is always to acquire a highly profitable company, but the more promising the company the more expensive it will be in general. Understanding what you’re willing to pay for certain revenue brackets within rapidly growing verticals will ensure that you don’t end up biting off more than you can chew.

When to Buy

The exact right time to buy a company depends on a lot of varied factors. There’s the economy, the exact growth rate of the market you’re considering buying into, the company itself, your own personal variables and so much more. One of the first questions to ask when considering an acquisition is why the company is being sold. Most of the time it’s a simple answer such as retirement, other interests, or that the current owner just doesn’t want to put in the work. But taking the time to do your due diligence will make all the difference in the long run.

The current pandemic has definitely given pause to many interested buyers this year. However, the economic dip is bringing wild success to many sectors that experts believe will be lasting changes. Much of the booming cyber economy is predicted to hold steady even after the full re-opening due to convenience and habit forming, making now a great time to buy into many of these companies that are not equipped to properly handle the increased workflow. Here, once again, it’s important to take your time, do your research, and work with an experienced broker who can advise you.


Finding the Funding

Deciding to buy a company is all well and good, except the money has to come from somewhere. That’s where programs such as SBA loans and seller financing can really make all the difference. As a buyer, something that can make you stand out to both brokers and sellers is getting SBA Pre-qualified, even if you end up not buying a company that is SBA eligible it tells the selling team that you are both serious and well qualified to take on a new business.

Outside of the SBA Process and seller financing, many buyers choose to go with classic acquisition loans. The majority of conventional business loans will only cover $25,000-$500,000. Additionally, there is the little known ROBS path, also known as the Rollover for Business Startups, this is a system that allows you to withdraw early from your 401K or other traditional retirement account in order to pay for the company, this option does not actually require any repayment as the money was yours to begin with.




The Kind of Buyer You Should Be

The key character traits every seller is looking for in a buyer are prepared and decisive. Understanding what you are looking for is just the first step, breezing through the process takes skill, experience, and confidence. That’s where Website Closers come in. our team does more than an average brokerage, walking our clients through the entire process with clarity, honesty, and integrity. Throughout your buying process, we help ensure that you can make the best possible decisions for your future.

Additionally, every seller and broker understands that this is a tough process for you. An incredibly complicated and high stakes decision, but these negotiations are the time for action. When you jump into the process be ready to go and acquire a business, the more back and forth a buyer has, the likelier the selling team is to simply move on to the next buyer.


Buying Process Bottom Line

Businesses are bought and sold every day but buying one for yourself is a complicated and demanding process. Much of this complexity comes from the detailed industry understanding that it takes to make the right decision for you. That’s why we highly suggest getting in touch with one of our brokers to help advise and represent you throughout this process.

When it comes to where, why, and how to buy a business, the details matter. Take your time, do your research, understand your budget as well as the criteria that matters most to you. A decision like this is a life changing opportunity and with the right help, you’re sure to find your way.


5 Tips for Buying a Business

Whether You’re a seasoned buyer or this is your first acquisition, there are a few key questions you need to ask yourself and keep in mind throughout the arduous process of buying a company. From emotional and financial readiness to a well-rounded understanding of the potential of your new acquisition, any buyer should consider every angle before finalizing their decision.

5-tips-for-buying-a-business-by-WebsiteClosers1. Are You Ready to Buy a Business?

Being your own boss is always an appealing concept, but it can take an unimaginable amount of time, determination, business acumen, and money to take on any business venture. While one of the advantages of buying a business rather than starting one is off the bat profitability, there will still be the payment for the company, the transition system, and maintaining revenue to worry about. Taking some real time to fully analyze what you are ready to take on is the first step in any successful business endeavor.

In this same vein, being financially equipped is just as important. Getting a full understanding of your budget is key, you never want to buy a company at the very end of your budget and not leave yourself any wiggle room for unexpected personal needs or bumps in revenue during the tradition. Be sure of your ability to qualify for and take on a loan if needed as well. It’s best to have your funding locked down before even entering the marketplace.


2. Understand Your Target Industry

Choosing the type of business to buy is a crucial step in this process and a key to making that all important decision is in understanding the economy both at large and within the segment you’re interested in. The best place to start here is where your experience is, and your interests lie. From there, it’s research time. Websites such as IBISWorld, Statista, and AlliedMarketResearch are great places to start here. Looking at the cold hard facts will give you the clearest understanding of where a market is and where it’s going.

After you’ve given the specifics a thorough look through, it’s time to place your knowledge into the world at large. Where are people spending their money? Why? The main drivers of your target market are key here, but so is demographics. Is there demand for this company? Will it last? Can those most interested afford it? Armed with the answers to these questions, you’ll be able to clearly define your goals, business category, and can even begin forming your growth strategy.

3. Consider the Assets and Liabilities

Once you’ve got a potential acquisition in your crosshairs, it’s time to dive deep into the company and all its offerings. Many people focus on the money, which is important, but forget about the value of assets and the risk of possible liabilities. What specifically to look for will change based on industry and the business itself, however, understanding the value of this opportunity’s intellectual property, actual property, inventory, and media mix will be invaluable throughout this process.

These owned assets can include tangible value such as equipment, real estate, and product inventory; but it also extends to the intangible. To value like the active customer community, a company’s reputation, their digital domain, keyword authority, ongoing and upcoming outreach projects, and intellectual property. Valuing these assets can be a complicated undertaking but it really pays off when it comes to understanding the true value of each business you consider.

4. Analyze the Current Standing

Being sure about your prospective company’s vertical is one thing, but what about it’s actual potential? Much of this can be predicted with current growth and projected numbers, but it’s also important to understand this company’s full reputation. Leveraging online reviews, the Better Business Bureau, and other key sources such as their GlassDoor rating and local news coverage can make all the difference in a business’ value and future success rates.

More than reputation, this also refers to clean books. You never want to acquire a company with a history of fraud, missing taxes, or unpaid debts. Taking on this company is also taking on their liability, being fully aware of the situation is absolutely necessary to making the right decisions. Always have an accountant look over the financials, projections, and monetary history of a company before entering negotiations.


5. Never Ignore the Competition

Finding your ideal company in your favorite industry is great, but how much market share do they hold? Where are they on the list of those with Google’s key word authority on their relevant phrases? A company can be extremely impressive when standing alone and still not hold a candle to the top competitors in their vertical. Long-time success is often determined by market share and brand recognition within the market itself.

Here, Better Business Bureau, Yelp, industry specific comparison sites, and even popular review blogs can be the key. Are enough people interested in this brand and switching to this brand to justify the price that you are going to pay for it? That’s the core of this specific fact-finding mission. Customer satisfaction is a common factor, but employee satisfaction is just as important, if you can’t get the best team or industry partners to work with you, then your company might not be able to grow at all.


Business Buying Tips Bottom Line

Overall, buying a business is a multifaceted process that makes for a long, tedious time for anyone. Understanding your readiness level both emotionally and financially, getting a real feel for your target industry, learning the value of each of your prospective company’s assets, and understanding where your company stands within it all are the true keys to effectively buying a company. With the right resources, help, and knowledge, you can find the right opportunity for your future.


How to Make Your Inquiry Stand Out

With so many buyers and corporate acquisitions groups out there, it’s a seller’s market, especially for a good company in a growing market. Once you’ve done your research and invested your time and efforts into choosing a company, its time to make sure that your interest is noticed as a serious and promising offer at first glance.


how-to-stand-out-as-a-business-buyer-by-WebsiteClosersMake it Clear that You are Qualified

It’s important to remember that this company is the seller’s baby, they’ve made it, nurtured it, and put their life into it since its inception. They don’t want to just hand it to the highest bidder, they want a new owner that will treat it well and keep it healthy. Your inquiry is an offer, but its also an application to become the new owner of their hard-built business.

Even if your experience isn’t an exact match, explain why it is. How your past has made you a uniquely perfect fit for this company and how you respect what they’ve built. Don’t be shy about showing that your financially qualified as well, point to your past positions or loan pre-qualifications to show how serious you are about being a straightforward buyer and effective new owner.


Tracking Inventory

Tracking your FBA inventory can become challenging as it is no longer being held by you or your staff. With a storage limit of 10 cubic feet and a maximum Inventory Performance Index, or IPI, of 500, keeping an eye on your inventory is an absolutely necessary part of keeping your business alive online. This can be manages through Amazon’s Seller Central or through many SaaS platforms specializing in FBA Inventory Tracking.


Ask Questions and Be Persistent

The process for selling is just as, if not more, long and complicated for the seller as it is for the buyer. Stay top of mind by making yourself seen and heard. Don’t be a nuisance but be a reminder that you’re there, qualified, and interested. These should be messages and questions that prove both analysis of the information given and how tenacious you are in pursuing your goals.

Reaching out to the seller and broker once a week or so will keep your offer at the top of the pile, prove your interest, and help the seller get to know you. Ask qualified and specific questions that show that you’ve read the listing and the offer packet. This ever important follow up is about furthering their understanding of your business acumen, determination, and commitment.


Be Easy to Contact

When the selling team reaches out to you for feedback, more information, and questions, make yourself readily available and respond quickly. Once the ball starts rolling on these deals, being responsive can make or break the negotiations. Understanding the significance of this deal both for your life and the seller’s, respecting each other throughout the process is of the utmost importance to ensure that the deal goes through smoothly.

Reaching out to the seller and broker consistently is important but responding to their responses and their questions in return shows both respect and reasonability. The seller will be transferring their company to you and your ability to develop and close business dealings is something they’re considering throughout this process.


Standing Out Bottom Line

There are countless buyers out there and finding the right company with incredible potential is something that everyone else is looking for too. Once you’ve decided on the company for you, it’s time to prove that you are the best choice while also doing your due diligence. It’s important to note that this is an interview on both sides. The seller cares about their company and wants to see that you can take care of it and grow it, at the same time, you are appraising the company, kicking the tires, determining for sure if this is where you want to spend your hard-earned money.


The Bottom Line.

There’s a lot that goes in to buying a business. From deciding if an acquisition is even the right move for you to closing the final deal, understanding, research, and professionalism are the keys to your future success. A few ways to ensure that you know what you’re getting into are to work with an experienced broker, meet with an accountant to both determine budget and analyze the financials, and do in-depth research throughout each stage of the process.

After you’ve decided that you should buy and the initial criteria that you’d like to focus on, be sure to dive into each segment of the selection process. We recommend investigating the strength and growth projections of your industry verticals, calculating the value of the company’s tangible and intangible assets, and understanding where this offering stands both in general as well as when compared to the rest of their competitors.

When you’re confident in which company you are going to pursue, ensuring that your inquiry stands out from the pack should become your top priority. In this case, following up, being reachable, and proving your qualifications are how you put your bid above the rest of the crowd. The more promising the company, the more competitive this stage of the process will be.

All in all, there is an unrivaled opportunity in acquiring a company. However, finding that perfect fit for both you and your future can be a lengthy and involved process that can frustrate even the most experienced business professional. Taking clear and impactful steps to ensure your prosperity without putting too much on your plate at once will be the difference between a successful closing and the endless limbo of constant searching. To start on your way to finding your next endeavor, check out our listings today.


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