Posted on Mon, Dec 07, 2009
Last week we talked about the emotional aspects to the business buying process. You learned when emotion must impact your thought process and conversely when to avoid making emotional decisions. Today, we will review the other side of the equation when common issues arise in the business buying process and you must let logic prevail
Numbers Don’t Lie – People Do
Whether you are looking at industry data, company financials, or any other reports on the business where numbers are involved, the only approach is to allow logic to dictate your conclusions. No matter what “twist” any seller wants to put on their numbers; the fact is that the numbers never lie; only people do. There is never any reason to attach emotion to numbers unless there is an attempt to manipulate them. So when we are talking numbers, it is all black and white, good old logic.
Now of course, there may be instances where you must take certain things into consideration when analyzing financial statements for example, or there can be some instances where further discussions are appropriate, but in all, the numbers are the numbers and so you must review them logically.
The same holds true for any data you may uncover such as customer concentration issues, declining margins, company sales data, or industry trends that could impact the future of the business. You certainly want to allow the seller to make their point, but they will need a very compelling case to override the factual data.
Are You Going To Be Successful As The Boss?
No matter how wonderful or poor a business may be today, you must logically determine whether or not you have the skills to replace the seller and operate the business successfully in the future. There is no such thing as an “easy business to run”. Every business has its challenges. Certainly, there are plenty of businesses that are operated by the wrong owner, and these present opportunities. However, this is only the case if you have the skill set to give the business what it needs to grow.
Conversely, solid businesses run by the wrong people will turn sour quickly. This is one area where business buyers make terrible mistakes. You must logically determine if YOU have what it takes to be the boss of the particular business. You cannot afford to grow into the job. Sure, there will always be some on the job training during a normal transition period, but if you lack the core strengths to run the business, then have the common sense and logic to make that determination and then find another opportunity.
Do not allow yourself to start dreaming about running the business, or trying to convince yourself you are something you are not. Take out the “logic mirror” and give yourself a good, hard look.
Are The “Fixes” Really Fixable?
Everybody is a critic. It is very easy to sit on the sidelines and point out all the things that a business owner is doing wrong. I am still amazed whenever I get an email from a prospective buyer outlining all the wonderful things they think they will do once they take over, and how they are going to repair all the ills that are now in place. Well guess what? Unless you have a wealth of experience in that specific type of business, you truly have no clue to draw up any meaningful strategies yet, nor do you know whether or not your ideas make any sense at all.
This comes back to what you have probably read many times over the years in my column; you first have to understand the business intimately before you can logically undertake any new aggressive initiatives. Translation: “Don’t try to fix anything until you know what the heck you are doing!”
Pulling Off The Deal
Right now, the financial markets are in complete disarray. Getting financing requires very specific skills, and even with those, banks are not lending. The stimulus package the government is touting provides nothing more than stimulating debate right now. Time will tell if this gets the banks to start putting money on the street for the small business buyer. If you want to leverage a deal, seller financing is a must. But along with that strategy, you have to be in a position to “sell” the seller on your ability to get the deal done, and convince them you will be successful in the future. You cannot do this by making an emotional plea. It takes a logical plan to demonstrate and convince them they should bet on you.
The vast majority of our clients (91% in fact) get seller financing, but not every seller is going to be open-minded about it (those are the ones whose businesses won’t be selling today) and so you have to be able to logically approach this type of offer. Of equal importance, you have to know where these opportunities exist.
Similarly, you cannot have delusional expectations about the size business you want to acquire. Logic must prevail in your thinking. There is no doubt that the market is poised for incredibly creative deals today that can be very attractive to a seller if, and only if, you have the know-how (a.k.a. logic) to properly structure them.
Originally posted by Richard Parker on February 15, 2009 at 07:44 PM to blog/bizquest.com
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Posted on Wed, Dec 02, 2009
Whether you are selling or buying a business, allowing a business broker to assist you with the due diligence process is a good idea. Most business brokers would use a simple definition of “due diligence” to mean the process through which a potential buyer evaluates a target company or business for the purpose of acquisition.
According to the U.S. Securities Act of 1933, business brokers must conduct a due diligence investigation for the businesses they are selling and disclose their discoveries in order to not be held liable for non-disclosure.
In Arizona, business brokers are governed by the Arizona Department of Real Estate, which requires them to disclose material information that could affect a buyer’s interpretation of the sale price as well.
The due diligence process is similar to a forensic analysis. According to many business brokers, relevant areas of concern can include financial reports, the business’s place in the market, real and personal property, insurance and liability coverage, review of debt, employee benefits, immigration, and international transactions.
Business brokers say that due diligence should be performed before a company goes to market. This helps to uncover any hidden or unexpected costs that may be associated with the sale of the business, ensuring that the seller is receiving a fair sum from the buyer. The best advice is to employ the help of a qualified business broker.
Protecting the seller is a business broker’s job, and properly performing due diligence is one of the most important steps to take when selling your company. Broker’s may also be retained to protect the interests of buyers.
Portions of this post originally appeared on Web site of the International Business Brokers Association, Inc.
http://www.ibba.org”>http://www.ibba.org
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Posted on Tue, Dec 01, 2009
How long have you been looking at businesses for sale for the the right opportunity to buy a business in Tucson, or make a Tucson Business Investment.
Several months ago, Bizquest.com (a national business for sale listings site) conducted a survey and learned that nearly 70% of the would-be business buyers who responded had been looking for a business for over 7 months. The same group of buyers also reported that they had also met with fewer than 3 sellers during that period of time.:
If you are looking at Tucson businesses for sale, with an eye to making a Tucson business investment, then what this means for you is that if your strategy has been similar to those prospective buyers in this survey, it is time to make a major change to your approach. Otherwise, you might still be sitting in front of your computer in a year, no closer to buying a business in Tucson than you are now.
You can look at businesses, at a superficial level, from your computer. But you can’t buy one that way.
And you won’t ever buy a business if you’re just a “looker,” someone who never gets beyond the executive summary
to really dig in and get to know a business, meet the seller, understand the numbers, etc.
If you want to buy a business, you have to get off the porch and play with the Big Dogs, as they say. You need to get out and meet with people who have businesses for sale if you plan to make a Tucson Business Investment. You should meet them, ask them questions, and arrange to visit their businesses. And you should do this with quite a lot of businesses, because there is no other, and therefore no better, way to to expand your understanding of what different businesses have to offer you in terms of lifestyle, operating model, and return on investment. We believe that your decision to purchase in the end will be based on these factors, and that the lifestyle a business offers you will turn out to be perhaps the most important consideration. If you don’t go meet sellers, and get a feel for what their life is actually like while running the business they intend to sell, how else are you going to get a reality check on what your life would be like if you were running their business? You need to answer the question “what are the fundamentals that I am looking for in a business?”
The more sellers you meet with, the better you will get at rapidly and accurately analyzing a business, getting your questions answered, and working with your broker to determine what you think it is worth. If you don’t go through these steps, you will never actually get to the point of being ready to make an offer. And it goes with saying that you miss 100% of the shots you don’t take. If you don’t go through these precursor steps, you will never be in the position to buy a business. Preparation and practice are essential to buying a business. If you are not working with your broker to better prepare yourself, and you are not practicing by researching and interviewing, then quite frankly you are spinning your wheels and wasting your time.
Businesses for sale come and go on the market continuously. Will you be ready to seize upon the right opportunity when it presents itself? Buying a business can be intimidating, and time consuming, until you take the time to get into the process and understand all the steps involved and develop your own judgment at each stage. Once you’ve made that investment of time, you’ll take the mystery, and any hesitation, out of the process. But unless you take off your gloves and roll up your sleeves and get in there and meet real live sellers and get your hands dirty by digging into the numbers, you will never buy a business, and instead will remain part of the 90% of lookers who never become buyers.
So, unless you’re willing to get out in the market, don’t tell people that you are trying to buy a business. Because the only thing you’re really doing is wasting time.
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