Want to Buy a Business? First Consider These Five Things
C. David Chambless is a former GABB president and president of Abraxas Business Services.
Being our own boss is a dream many of us have had since first entering the workforce. Maybe it’s because we know we could implement processes that would produce better results, or we would like more flexibility in scheduling work time, or we want to leave something of lasting value to our heirs.
Whatever the driver, it is important to carefully consider many aspects of this critical decision. Here are five issues we suggest you carefully explore before taking the steps towards purchasing a business.
1. Taking out the Trash. Too many business owners only want to be CEO of their business. But, especially in the beginning, the demands of the business owner could be many – from stocking shelves to emptying trash to figuring out why the web site crashed. To keep the wheels on the bus you will most likely have to assume some duties that are not very glamorous.
2. “Show me the Money,” as they say in the movies. Before you begin exploring businesses, know your funding options and your qualifications for borrowing additional funds should you need them.
3. Get to know the Owner. As you look at businesses to buy, you will be evaluating someone else’s “baby.” The current owner has built, nurtured, and developed this company so it is important to help him/her feel comfortable with you, your approach, and your intentions.
4. The Art of Price Negotiation. Pricing is often a function of timing. If a business is doing well, the price will seem inflated. When the economy is slow, buyers will want to buy a business for less than its value. Also, timing can be a function of the seller’s circumstances. There is a right time to buy and a right time to sell.
5. Businesses Are Risky. Are you looking for a “sure thing?” If so, buying a business might not be for you. There is no such thing as a sure thing in business. With so many variables affecting business performance, there is no way to always predict results. Buying (and owning!) a business is all about risk…
These are just a few examples of the issues to consider before buying a business. A professional and experienced business broker can help you negotiate these and other issues in the successful purchase of a business.
C. David Chambless, a past president of GABB, is President of Abraxas Business Services and a lifetime member of the GABB’s Multi-Million Dollar Club.