Buying an Existing Business

Buying a business can be a daunting task, but it doesn’t have to be. With a little research and the right preparation, buying a business can be one of the most rewarding financial moves you ever make.

Before beginning your search for a business to buy, it’s important to have realistic expectations about what you’re looking for. A buy-out candidate isn’t simply an available business that costs less than the asking price. A buy-out candidate is a business that meets the criteria you set before beginning your search.

Your buy-out candidate should be in a stable industry with an expected growth pattern, and it must have definite opportunities for expansion. It’s important to remember that when you purchase a business, you buy all of its assets and liabilities—good or bad.

The next step is to prepare your business acquisition plan. A business acquisition plan will help identify the type of buy-out you’re looking for, and it acts as a business plan that can be used after you buy an existing business. This buy-out plan should include:

• Your key selection criteria, including location, type of buy-out, size, stability and expected growth pattern
• A plan for finding buy-out candidates
• A buy-out budget
• An exit strategy

As you begin your buy-out search, keep in mind that a buy-out candidate may be found by being proactive or reactive. Proactive business buyers will approach businesses typically not currently listed for sale, and begin discussions with the owner to purchase their business, where a reactive buyer waits until a business is listed for sale before submitting an offer.

It is important that you are aware that not all businesses are up for sale. If your plan is to buy a business that is not listed for sale, it can be difficult to buy it at the price you want. To buy an existing business without being reactive, your best best is to enlist the help of a seasoned business broker with experience in the industry you’re pursuing. A reputable business broker will have an assortment of negotiation tactics, knowledge, and experience that can get your acquisition over common hurdles.

If you don’t know where to begin in your business search, it can be helpful to consult with a business broker who has your best interests in mind. A buy-out candidate does not have to be simply the first buy-out candidate you come across, but instead it should be one that fits your criteria and meets your business acquisition plan.