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by Tom West
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Buying your own business can be a complicated
procedure. Throughout the buying process, it's
important to keep an open mind while searching
for a business that will fit your needs,
talents, skills and lifestyle. A business broker
has many different types of businesses for you
to consider; however, you need to remember that
there is no such thing as that "perfect"
business. Another vital thing to keep in mind is
that at some point you must be able to make the
"leap of faith" that separates you from being a
"looker" to a "doer." This isn't easy, but it
must happen if you are ever going to be in
business for yourself. The following discussion
of other key issues may help in the process:
Importance of Information: Understand that in
looking at small businesses, you will have to
dig out a lot of information. Small business
owners are not known for their record-keeping.
You want to make sure you don't overlook a "gem"
of a business because you don't or won't take
the time it takes to dig out the information you
need to make an informed decision. Try to get a
understanding of the real earning power of the
business. Once you have found a business that
interests you, learn as much as you can about
that particular industry.
Negotiating the Deal: Understand, going into
the deal, that your friendly banker will tell
you his bank is interested in making small
business loans; however, his "story" may change
when it comes time to put his words into action.
The vast majority of small business transactions
are financed by the seller. If your credit is
good, supply a copy of your credit report with
the offer. The seller may be impressed enough to
accept a lower-than-desired down payment.
Since you can't expect the seller to cut both
the down payment and the full price, decide
which is more important to you. If you are
attempting to buy the business with as little
cash as possible, don't try to substantially
lower the full price. On the other hand, if cash
is not a problem (this is very seldom the case),
you can attempt to reduce the full price
significantly. Make sure you can afford the debt
structure--don't obligate yourself to making
payments to the seller that will not allow you
to build the business and still provide a living
for you and your family.
Furthermore, don't try to push the seller to
the wall. You want to have a good relationship
with him or her. They will be teaching you the
business and acting as a consultant, at least
for a while. It's all right to negotiate on
areas that are important to you, but don't
negotiate over a detail that really isn't key.
Many sales fall apart because either the buyer
or the seller becomes stubborn, usually over
some minor detail, and refuses to bend.
Due Diligence: The responsibility of
investigating the business belongs to the buyer.
Don't depend on anyone else to do the work for
you. You are the one who will be working in the
business and must ultimately take responsibility
for the decision. There is not much point in
undertaking due diligence until and unless you
and the seller have reached at least a tentative
agreement on price and terms. Also, there
usually isn't reason to bring in your outside
advisors, if you are using them, until you reach
the due diligence stage. This is another part of
the leap of faith necessary to achieve business
ownership. Outside professionals normally won't
tell you that you should buy the business, nor
should you expect them to. They aren't going to
go out on a limb and tell you that you should
buy a particular business; in fact, if pressed
for an answer, they will give you what they
consider to the safest one: no. You will want to
get your own answers--an important step for
anyone serious about entering the world of
independent business.
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