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- © 1997 - 2009 Dynamis Plc
Karen E. Klein
Dear Karen: I’m retiring early and have some money saved up to start a “second career.” What I’ve always wanted to do is run my own company, but I don’t want the hassle and uncertainty of starting something from scratch. What is involved in buying a business that’s already operating successfully?
Answer: Buying an established business can be a good alternative for someone in your position, but be very aware that just because a company is doing well now, that doesn’t mean you can sit back and put it on autopilot once you purchase it. Small businesses are inherently risky propositions, and always take a great deal of hard work and dedication to succeed.
Many times, a small company is only as strong as the person who established it and built it from the ground up. That’s because the founder spent years establishing an intricate series of vendor, supplier and customer relationships that can dry up surprisingly quickly when that person is no longer running the show.
You also want to make certain that you perform careful due diligence on any company that’s for sale. Find out why the owner is leaving. Is there a legitimate reason, or is there a possibility he or she wants to dump a losing proposition while there’s still time? Don’t let anyone unload a turkey on you because you didn’t have the smarts or the time to have the company’s books examined by a professional.
You can find “Business for Sale” listings are many online sites, including M&A Marketplace, http://www.mergernetwork.com, BizBuySell, http://www.bizbuysell.com, and BusinessesForSale, http://www.businessesforsale.com.
However, once you get an idea of what companies are selling for, you’ll want to work with a professional business broker (if you’re buying a small company) or a sales intermediary (if you’re looking into middle-market firms). Most entrepreneurs whose companies are on the auction block will not talk to prospective buyers unless they’re using a professional, since confidentiality and due diligence are so important during the sales process.
Try the International Business Brokers Association, www.ibba.org, or M&A Source, http://bbms.masource.org, for referrals in your area. Make sure the person you choose is an experienced professional who has helped other individuals buy companies in the same industry you’re exploring.
Once you find a broker, spell out your acquisition criteria as specifically as possible. Include information on the kind of investment you’re looking for, as well as your financial background and available capital. Your broker will take that information and do a buyers’ search for you. Be aware that the process will take several months – possibly up to two years – but once you get the right fit, it can be very rewarding, and financially lucrative.
Copyright 2007 North Star Writers Group
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