Have you been successful running a business (or a big chunk of one) for someone else? Or perhaps you’ve always had a burning desire to be the owner yourself, but don’t want to take the big risks associated with doing a startup? Do you think you can create a lot of value turning around a sleepy operation with your vision, your leadership and management skill? But, you’re not sure how to buy a business?
The good news is that huge numbers of retiring baby boomers means there are plenty of businesses coming to market. The bad news? It is still tremendously challenging to find a good business to buy, so you need to cast a wide net when searching for business opportunities.
One path to finding companies for sale is to actively search for the business for sale by owner. Without a business broker involved, it will be up to you to do a lot of the work that they would ordinarily handle, and that includes qualifying the seller. You need to be armed with great questions to quickly understand if it’s worth investing your time into relationship building that must occur if you are to be successful closing on a business for sale by owner.
It’s important to remember the owner probably hasn’t done this before, it’s the most important decision they will ever make and they don’t know what to expect. While you want to learn the answers to your key questions quickly, you must be mindful of that fact that emotion plays a critical role in any successful transaction. Be respectful, patient and honest so you can get where you want to go.
The two key questions boil down to “Why now?” and “Why me?”
First, understand why they want to sell. Any stated reason other than retirement deserves thorough investigation, because a transaction is much less likely to happen without a very compelling reason like retirement. But, even if you hear the ideal reason, retirement, press the issue by asking again, “Are you really ready to sell?” or “What do you plan to do next?” You might be surprised to hear they haven’t thought about life after business. It is a good idea to make them think about it. There’s no point in moving forward with your evaluation if you aren’t completely persuaded that they are emotionally ready to exit the business.
The other key hurdle is making sure there isn’t an insider who would be better positioned to buy the business. Begin by asking, “Do you have any family members in the business?” If so, follow up by probing to understand why the kids aren’t taking over. Likewise, you should ask, “Is there a key employee who could buy the business?” This question will reveal a lot about their thinking, even if they don’t want to sell to an insider (they usually don’t have any money anyway), but it’s helpful to learn who might be a critical player on the team – listen and learn.
Your time is costly when evaluating businesses for sale by owner, so don’t avoid the key questions that might knock an opportunity off the list. Good deals are hard to find, so there’s no time to waste on owners who aren’t really ready to part with their life’s work.
To understand more about how to talk to an owner with a business for sale register for our free webinar, “Buy Your Perfect Business” here.