…while avoiding quagmires
I’ve been doing the buying and selling of businesses for 33 years, and I’ve learned a thing or two that can help buyers and sellers.
Buying or selling a business is a process as well as a commercial transaction. Most entrepreneurs will do only one deal in their entire lifetime. A deal can be a challenging, rewarding event, the first step in a successful new venture for the buyer or the start of a hard-earned retirement or succession for the seller. Or, it can be a gut-wrenching, hideously expensive, nasty hell on earth experience. It’s your choice.
10 Practical Tips for Buying a Business
- First, ask yourself: why do you want to buy, and what do you want to buy? Narrow the scope & price. List deal-stoppers (e.g., you don’t trust the vendor). Stick to them.
- Price out the deal – how will you pay for the purchase, including all deal costs?
- Assemble your team: you must have financial, tax and legal advisors; determine who is thequarterback – every deal needs one – and who is doing what.
- Research targets yourself, even if you get assistance. Visit, stalk, test, ask about prospectsbefore you contact them.
- Ensure total, immediate communication amongst all team members. Don’t compartmentalize the team, there will be overlapping skills and responsibilities.
- Never ignore red flags or smoking guns during due diligence: resolve them.
- Insist that the vendor gets independent, competent legal advice: this will save you the most money and grief of any action you can take! Really.
- push the deal process ahead, avoid long pauses = money lost/spent. Set & follow deadlines. Follow-up.
- Don’t hesitate to ask the vendor any question about the business: “any” means “any”. Remember, all the good, and all the bad will be yours after closing.
- Keep lists, revise it often, details are everything.