Buying a Business - the considerations
`Your Road To Success`
a CAVENDISH BLUE SKY THINKING BULLETIN
WHY BUY A BUSINESS AND WHAT TO CONSIDER
In this article we'll review all of the considerations to be made: the upsides, the downsides, and all of the personal, professional and family considerations that must be factored into your decision to buying a business successfully.
There is only one reason "why" you should buy a business: because you want something better than whatever it is that you are presently doing. Most people spend their whole life making a living and completely forget to make any money!
There is absolutely no better investment vehicle than owning a `good` business. Whatever it is that you can possibly want in life from a financial and lifestyle perspective can be gained from owning your own business.
In the guide you will learn:
§ Understanding and outlining your reasons for buying.
§ Why business ownership is the quickest route to riches.
§ How to form the right attitude to buy that will immediately set your head straight for this project.
§ Why looking to "buy a job" is the wrong approach.
§ Learn to buy the benefits and the future lifestyle business ownership will bring.
§ Discussion of the potential financial rewards.
§ Controlling your own destiny and the challenges to consider.
§ How to creatively attack any potential business purchase.
§ Financial considerations you must make.
§ Learn the 12 things you must do today to get your finances in order to make a purchase.
§ Why you must realize that there is no such thing as a secure job unless you own the company!
§ How your past professional career has already prepared you for the risks you may face.
§ What are the downside possibilities?
§ How to overcome all obstacles if you've never been in business before.
§ A three-step system that will overcome any lack of experience you may have.
§ Understanding the objections and situations you will face with family members and how to include, not exclude them.
§ The attitude you need if this process is new to you.
§ Deciding if you are window-shopping or committed to buying.
§ Why 90% never buy and how their "looking" paralyzes them to make any decisions.
§ The reasons why your best chances of success are in buying an existing business.
§ The tax benefits of business ownership.
§ The pros and cons of looking for something specific and why you must keep an open mind.
§ How long will it take to buy the "perfect" business? (By the way, there's no such thing. We'll explain why.)
§ Ready! Aim, Aim, Aim! Learn why others can't make that final leap and how you will avoid their dismal fate.
§ Preparation and completion of your Personal Financial Statement (interactive worksheet).
"The most widely used strategy guide and reference resource for business buyers."
THE TEN COMMANDMENTS of BUYING A BUSINESS
Fundamental to your purchase is determining the most basic of factors: is this a good business? This section outlines the ten rules that cannot be bent, avoided or broken. Any business that you buy must subscribe to all ten.
For example: Commandment # 2 - Buy A Good Business and Make It Great! Do not look to buy a cheap business; it's like a bad used car. You'll spend all of your time trying to patch 'leaks" and you'll have little or no time left for building the business. Buy a good business, a solid one, that through your talents, can grow and flourish. Start off with a strong foundation and build from there!
In this section you will learn:
Commandment # 1 - Pay For The Past, Consider The Present, But Buy It For The Future!
§ The past financials will help determine the purchase price, but they do NOT guarantee what the business will look like in the future.
§ You must evaluate the business for what it can expect to provide you with after you buy it.
Commandment # 2 - Buy A Good Business and Make It Great!
§ All good businesses possess certain common features; you'll learn how to determine whether the one you're considering already has these in place.
Commandment # 3 - Ingredients Are NOTHING Without A Recipe.
§ After the purchase, can you put all parts of the business together into one cohesive unit poised for growth, and at what cost?
Commandment # 4 - Fall In Love With the Profit, NOT the Product!
§ You'll learn how this traps so many others when they get emotional about the business before they buy it and their judgment is forever clouded. You must remain objective!
Commandment # 5 - Do What You Do Best and You'll Manage The Rest.
§ Making certain that you already possess what the business really needs.
Commandment # 6 - Autopilot - (can the business be put on "cruise control"?)
§ In order to grow any business, you must take advantage of technology - can this business improve its systems and run on its own so you can focus your attention on driving the profits?
§ Where can you access the technology and what are the costs?
Commandment # 7 - Determining What Holds "The Gold".
§ Nearly all businesses possess certain components that the current seller has not exploited.
§ You'll learn how to identify these sometimes "hidden" values.
Commandment # 8 - The Three Personal Things That Every Business Must Possess.
§ You MUST be able to explain it in simple terms to others.
§ You MUST be able to explain it with great enthusiasm.
§ It MUST be a business that makes you very proud.
Commandment # 9 - Evaluating and Identifying What's Not Perfect Yet.
§ No business is perfect and every business needs attention. Sometimes the smallest improvements yield the greatest results. You'll learn how to pinpoint all of them.
Commandment # 10 - What's It Worth To YOU?
§ Only you can truly evaluate the benefits of any venture. You'll understand how to take a realistic approach to this crucial exercise.
THE RIGHT BUSINESS FOR YOU
It is far too difficult to explain in one paragraph specifically what it is that will direct you to the right business. Clearly, it is a combination of all of the areas that are covered in this excellent guide. However, if we were forced to reduce our entire course down to one sentence, it would be this:
"Whatever it is that you do best must be the single most important factor that drives the revenue and profit of any business that you may consider purchasing." End of story!
Many buyers fail to recognize what business is right for them. Only you know what it is; nobody can tell you what's right. You know your talents, your strengths, and weaknesses. Be honest with yourself. Do not be delusional. Do not pretend you're something that you're not. The really successful people are those who realize that they do not know it all. Focus your search on businesses that will grow from your strengths and not suffer from your weaknesses.
As long as you match your greatest strengths to the right business, you cannot help but be successful.
In this section you will learn from the guide:
§ A complete review and evaluation of the knowledge you already own.
§ Identifying potential businesses that can benefit from your strengths and not suffer from your weaknesses.
§ Discussion of your areas of familiarity.
§ Identifying the industry you know best .
§ Exploiting a niche within your job or industry.
§ Targeting businesses that you've always liked.
§ Establishing expectations that are realistic and achievable.
§ The sacrifices you must be willing to make.
§ Clearly identifying what "drives" you (money, the need to build something, control of your own destiny, independence?).
§ Understanding, dealing and overcoming restrictions you may have.
§ Identifying the job functions that you like to do (we tend to be better at the things we enjoy)
§ Recognizing specific tasks that you don't enjoy.
§ Discussion of your individual strengths.
§ Honestly identifying weaknesses, how to deal with them and understanding their role.
§ Income expectations.
§ Turning a hobby into a business (NOT A GOOD IDEA)
§ Your fears or comfort level in a sales role.
§ We will discuss how anyone regardless of experience, can perform in a sales role. All great salespeople possess seven distinct characteristics which can be easily learned by anyone-we'll show you how.
The guide will set your schedule for buying a business in a fraction of the time it takes others. You will learn what time you must devote to each stage of the buying process and how to avoid wasting time like so many others. Your search will be focused; your attention will be on businesses that make sense for you.
The average buyer spends over a year and a half looking for a business and then there's a ninety-percent chance that they will drop out. The longer you look, the greater the chances you'll never buy!
Interestingly enough, 82% of the people who follow our program and use our free consulting buy a business within six months.
Instead of looking at business after business and then trying to decide if any are right, you'll know what businesses are right for you, and how to find them.
Life is short; opportunity comes in a second and disappears in an instant. There is far too much potential upside to not complete this project in the shortest time possible and move on to earn the benefits that you so richly deserve!
In this section you will learn:
§ The theory behind time management, its importance, and learning how to control your time.
§ Buying process timeline and schedules to be met from beginning (course study completion) to the end (your purchase of a business).
§ Learn what traps most people into becoming chronic lookers.
§ The rationale and strategy you need to follow to get this done quickly and right!
§ The specific steps to take to cut the average buying time by 70%.
§ How to get all of the information you need quickly and easily on any business without spending a dime.
§ Use interactive worksheets that will prepare you for any possible situation that you will encounter.
§ How to get the seller and broker to work on your timelines
§ Why all other parties will procrastinate at every chance and what you must do to keep things moving.
§ Learn the key areas that cause most to waste their time.
§ Outlining your buying schedule and the tasks to be completed for each stage.
§ Seven things to do at once so you won't get delayed later on.
WHERE TO LOOK
If you do not know what to look for precisely, it's difficult, if not impossible, to find the real good businesses. The longer you look, the greater the chances you'll never buy. Remember, this is a buying process, not a looking process!
Most people limit their search to the Internet, but only one in five businesses listed for sale online ever sell. Some of the best opportunities never get to the public market. We will outline how to tap into the "hidden market" and find opportunities that no other buyer will ever see.
By the end of this section, you'll know precisely how to identify good potential businesses.
Recently, we conducted an interesting project: we spent 90 minutes on the Internet, bought three local Sunday papers and reviewed four popular magazines. We wanted to get a real feel for what the average buyer would face if they decided to look for a business that particular week. We found over 150,000 businesses available for sale.
If you do not know where to look, what to look for, and how to tear apart listings, well good luck - because you'll spend the rest of your days looking!
In this section you will learn:
§ Examination of all the resources available to you.
§ The best places for you to find what you are looking for.
§ How to interpret the broker listings.
§ Which ones to keep, what to toss aside.
§ How to get more information than is published.
§ How to identify key "for sale by owner" listings.
§ Understand the attitude behind every "for sale by owner" listing.
§ Learn why you must wait before calling the seller.
§ Tear apart buyer-listing sheets and focus solely on what's right for you.
§ Identifying and avoiding "Get Rich Quick" schemes.
§ Publications to use and ones to avoid.
§ How to conduct a direct solicitation of the "hidden market" (includes template letters).
§ Who to contact at the various publications and get them to give you great industry information and potential available businesses.
§ The Internet - a complete review .
§ Listing of the best websites for business for sale listings.
§ How to avoid hours of useless searching.
§ Utilizing the networks of Lawyers and Accountants.
§ Getting them to solicit businesses for you at no cost.
§ Networking Banks and other lenders.
§ Using The Chamber of Commerce as a tool and how to get in even if you do not qualify for membership.
§ Friends, family and business contacts
Buying a business is a project combining several individual tasks. No single part is more important than another, somewhat like the spokes on a wheel. Do a great job with everything but neglect the due diligence for example, and you won't make the right decision. Put all the pieces together but overlook the financing and again you will fall short.
START RIGHT: Begin right and set the proper foundation. To do so, you must be organized. If you do not properly sort, record, review and file Multiple Listings for example, you won't have the luxury of reviewing comparative listings as you narrow the search. Get off to the right start. Organize yourself from the very beginning so that each stage can build upon the last one. This lesson will show you how to get set up, the files you need, how to log the mountains of information, and how to successfully retrieve what you need in a moment's notice.
In this section you will learn:
§ Making organization a priority.
§ A complete list of all of the items that you will need to begin the search.
§ Specific file folders to set up.
§ The system to use to manage all of the paper.
§ Keeping the information under control and at your fingertips.
§ Organizing the listing sheets.
§ What to highlight and identify on individual business listings.
§ Discussion of Non Disclosure Forms and what you should and should not sign.
§ Dissecting the financial information.
§ How to catalogue individual businesses.
§ Gathering the banking information you'll need.
§ Creating "Post Purchase" files.
§ A system to organize all of the thoughts that will come into your head.
§ Review of the money required for the search.
Most inexperienced buyers make the terrible assumption that all they must do is contact a business broker and presto; the right business will come to them. Nothing is further from the truth! A good broker can help you but the wrong one will prove to be a monumental waste of your time!
Business brokers represent the seller or the deal- ALWAYS! They do NOT represent the buyer. The seller pays their commission even if it's not their listing and so they're immediately in a conflict of interest.
Business brokers will not provide you with unbiased advice. Their goal is to sell you ANY business, not necessarily the right one!
We recommend that you "use" a business broker to help you in two specific areas:
§ providing access to available businesses for sale through their database of listings.
§ delivering bad news to the seller.
In this section you will learn:
§ Should you use one? (Yes you should, but you must use the right one.)
§ Understanding why you must show them you're a serious buyer (because they probably won't even return your emails/phone calls until then).
§ How can brokers help you.
§ What's in it for them?
§ Who pays their commission and why this is important?
§ Is their commission negotiable and how to get them to reduce it to help you pay for a business?
§ The obligations you have to the broker.
§ How to find a good broker.
§ Websites to use to locate local brokers.
§ Your strategy on your first call to the broker.
§ Setting up a meeting with a potential broker
§ Learn one great technique that will immediately identify how effective they will be.
§ 18 Questions to ask each broker when you interview them.
§ Checking out their references with former buyers and sellers.
§ The 17 Questions to ask their current clients.
§ Calling former business sellers for references and The 10 Questions to ask each.
§ Getting the broker to show you ALL of the listings and the ones that may be "reserved " for someone else.
§ Understand how the brokers negotiate with the seller.
§ Should you use the broker's contacts (professionals, banks, etc.).
§ How to handle businesses that you may find on your own (getting a broker to acquire additional information for you).
§ Review and case study of the Broker Listings, Non Disclosure Forms and Multiple Listing Sheets.
§ Exhibits and forms they will want you to sign (understand why you can't agree to some of them).
WHY EVERY BUSINESS IS FOR SALE AND HOW TO APPROACH THE ONES THAT AREN'T
Every single business is for sale, even those that aren't currently listed. Under the right conditions every owner would sell. Wouldn't you? You will quickly learn what types of businesses are right for you and it may in fact be a company that is not currently on the market. Once you determine the specific type, which you will, why limit yourself to what is listed?
You’ll learn how to creatively approach every business, even those they may not be “on the market” currently. You'll know how to present yourself properly to the seller without being overly eager and you'll be equipped with the skills you need to convince someone to sell you their business even though they may say that it's not for sale.
In this section you will learn:
§ Understanding why every business owner will sell.
§ The six conditions by which sellers choose to sell.
§ Identifying under-valued and potential candidates.
§ Learn how to tune in to every business you come across and see their strengths and weaknesses.
§ Proven strategies to approach and solicit a business that is not currently for sale.
§ Pursuing a business that has always intrigued you - the ideal business may be staring you in the face.
§ Includes sample letters and templates to use to conduct direct solicitations.
FRANCHISES - ARE THEY FOR YOU?
Under the right conditions and for certain buyers, a franchise provides a wonderful option that is well worth investigating. However, you are far better off buying an existing location, one that's already operating successfully, rather than trying to find, buy and build a new one.
When you approach a Master Franchisor regarding a new location they will bombard you with market studies. They employ the slickest salespeople imaginable who will tell you that if their study proves correct and if the passing traffic trends continue and if the area continues to grow at the same pace and if the industry continues to thrive and if you follow their steps exactly and if you buy all of their promotions then you should do well.
And if you were born into the royal family, you wouldn't have to work for a living!
Franchises can be great business models for some people, but BUY A RESALE! There are plenty available and we'll show you where and how to find the right one.
Franchises require a different set of investigative strategies and we'll outline them all for you in a step-by-step approach. You'll also learn how to approach the Master Franchisors so that that they will divulge available resale's as opposed to trying to sell you a new, unproven location.
In this section you will learn:
§ How to make money in franchising.
§ Learn the three big advantages that a franchise can offer.
§ Understand why franchises are not for everyone.
§ The exact steps to find available resale's.
§ Why franchisors cannot guarantee your success.
§ Getting the Master Franchisor to cooperate.
§ Find resale's that aren't "officially" for sale.
§ Evaluation of new versus existing franchises.
§ Why some Franchisors won't tell you about resale's.
§ When to get in to a franchised concept.
§ Contracts: their importance, the details, and what you must be on guard for.
§ The 25 things you absolutely must know about the franchise contract.
§ How to avoid doing a deal and having it vetoed by the Franchisor.
§ How your partner (The Master Franchisor) may be your competitor.
§ Getting the owner to pay the transfer fee.
§ Conducting the Due Diligence and why it's so different from a non-franchised business.
§ 17 critical areas to be investigated.
§ How you can "test drive" a franchise.
§ Key questions to ask other franchisees.
§ 15 crucial questions to ask the franchisor to ensure that they are the right group to be with.
§ Resources to find available franchises.
WORKING WITH PROFESSIONALS
Regardless of what size business that you are looking to purchase, you'll need to use the services of both an accountant and lawyer. The smaller the business, the less you'll need them, but you do need them. They will be a defence mechanism for you to be certain that anything that you agree to is legal and binding, and to ensure that you are insulated from as much exposure as possible.
Fairness, reason and balance should be sought. Don't let lawyers screw up your deal - they are very capable of doing it. Remember, the lawyer's role is simply to write in "legalese" what you and the seller have agreed upon.
You' will learn how to hire them, and which questions to ask that will assure you of engaging the right professionals who can assist you in your purchase and not simply take your money for drawing up contracts.
In this section you will learn:
§ Complete discussion on accountants and lawyers and the way they operate.
§ Understand why they can ruin every deal.
§ What role can they play in getting you a better deal.
§ The protections they can offer.
§ Do you need them?
§ How they can help you.
§ Leveraging their contacts.
§ How to avoid the traps that many fall into and pay a fortune for services you can easily do on your own.
§ How to choose them.
§ 9 key questions to ask them to be sure that they're right for you.
§ Checking their references.
§ Getting free information from them.
§ When will you need a specialist?
§ Setting the parameters of the relationship.
§ 20 key points to cover in your first meeting.
§ What are their costs?
§ Negotiating their fees (everything is negotiable!).
§ Why you must ask certain questions first.
§ How to keep them focused on your work.
§ Why big fees don't necessarily mean that they're any good.
§ Making sure that they are interested in your business.
§ Eleven Sure-fire Ways to save money on their fees (this is bulletproof!).
A fear or lack of knowledge in accounting must not, will not and cannot prevent you from buying a business. The beauty of accounting is that it's based on numbers and numbers do not lie. Sellers may lie, but not numbers.
All Financial Statements follow a similar pattern from one business to the next so the format will become familiar to you quickly and our approach will have you feeling confident and comfortable within an hour. It's really is very easy to gain a grasp on this area quickly and effectively.
Do not get nuts about the financials. You want to view them to get an idea of what to expect but they reflect the past, not the future. You don't buy a business for the past unless you're planning on going backwards.
In this section you will learn:
§ A complete overview of accounting in simple terms.
§ You will learn how to properly interpret Financial Statements in one hour!
§ Defining "accounting" for the most inexperienced buyer.
§ Understand why a lack of accounting cannot prevent you from purchasing.
§ Why accounting is overrated.
§ Learn what aspects of accounting can give you a glimpse of the future.
§ A case study that will clearly define the accounting basics.
§ If you can add, subtract multiply and divide, you've got most of it covered.
§ Matching debits and credits.
§ Understanding time and its relationship with in accounting.
§ The basis for accounting.
§ Understanding Cash and Accrual Accounting.
§ What to look for on financial statements.
§ What many people fail to overlook.
§ How to determine if they are true and accurate.
§ Learn all the buzz words so sellers will know you're an expert.
§ Real-life examples, worksheets and case studies.
§ The different periods in the life of a business.
§ The Balance Sheet (interactive worksheet).
§ Defining Net Worth.
§ Valuing Assets.
§ Understanding Liabilities.
§ Determining Owner's Equity.
§ The Income Statement (interactive worksheet).
§ Understanding Revenues, Expenses and their meaning and impact.
§ Learn how to uncover the hidden meanings.
§ Learning all of the ways that a seller can manipulate the financials to make them look better than they are.
Click on the image below for comprehensive details on making `buying a business successful`
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`Building An Excellent Business!` is available for immediate purchase by visiting the secure Cavendish eStore online at: http://www.cavendish-mr.org.uk - customers can download this e-book in PDF Acrobat format immediately after purchase.
More Economics and Business Inspiration:
`Accelerate with Impact` -
by Colin Thompson ISBN: 978-1-84549-289-2
Accreditation: UK Registered Learning Provider:10025755
Note: About the Author Colin Thompson
Colin is a former successful Managing Director of Transactional/Print Manufacturing Plants, Print Management/Workflow Solutions companies and other organisations, former Group Chairman of the Academy for Chief Executives and Non-Executive Director, helping companies raise their `bottom-line` and `increase cash flow`. Plus, helping individuals to be successful in business and life in general. Author of several publications, research reports, guides, business and educational models on CD-ROM's/Software and over 400 articles published on business and educational subjects worldwide. International Speaker and Visiting University Professor.
Buying a Business!