Real World Points

Real World Points on Buying a Business

EVERY POTENTIAL BUYER SHOULD KNOW

Sunbelt Business Brokers and Business Brokers South continue to put great effort into the buyer interview and education process. Understanding the buyer’s needs is a very important part of our services. Below are just few random “real world” points about buying a business that you might find helpful.

    • Approximately 90% of those who buy a business end up with something completely different from the business that first interested them.
    • 90% of business buyer are first-time buyers and are looking to replace a job.
    • The financial statements of privately owned business are the result of the owner’s personal decisions and are done to minimize the full impact of income taxes.
In theory, there is no difference between theory and practice. But in practice, there is.”
– Yogi Berra
  • Small business owners are cautious about revealing their financial records until they know that they have a bona-fide buyer interested in purchasing their business.
  • Making an offer to purchase is not the final act; it is the first small step on the way to buying a business. Making an offer is like asking someone out on a date; it is not asking someone to get engaged. Once you see that the business is right for you, then plan the wedding.
  • Buyers will be protected by contingencies in the offer that effectively allow withdrawal of the offer at any time for any reason. Deposits are fully refundable up until the time that the buyer allows the closing documents to be prepared.
  • About 80% of new, start-up businesses fail within the first five years. Buying an active, ongoing business greatly increases the probability of success.
  • Successful entrepreneurs not only have complete self-confidence, a high energy level, and a strong sense of direction. They also have a strong preference for independent thinking versus corporate group think.
  • Most studies indicate people who buy a business want to run their own show, be their own boss and build something for themselves. Money is not the key factor.
  • Banks do not like to finance business purchases. It is best to start looking for financing from other sources with the seller being the first one to approach.
  • Most business buyers will not have sufficient funds to pay cash for a business.
  • Directly negotiating with the seller can be stressful and may create friction between you and the person that you may be asking for financing and training.
  • Buy a business that you like and one that you can picture yourself in. Look for the many ways you can improve the business and consider what talents you can bring into the operation.
  • An enthusiastic new business owner/operator should be able to increase revenues almost 20% just from the change of ownership.
  • You should expect the seller of a business to provide you with complete training, and they should be willing to sign a non-compete agreement with you.
  • Be realistic. A $5,000 investment will not buy you a business that earns $100,000 a year.
  • The best reason to buy a business is because you want something better than what you are presently doing.