How to Buy a Business

…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

  1. 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.
  2. Price out the deal – how will you pay for the purchase, including all deal costs?
  3. Assemble your team: you must have financial, tax and legal advisors; determine who is thequarterback – every deal needs one – and who is doing what.
  4. Research targets yourself, even if you get assistance.  Visit, stalk, test, ask about prospectsbefore you contact them.
  5. Ensure total, immediate communication amongst all team members.  Don’t compartmentalize the team, there will be overlapping skills and responsibilities.
  6. Never ignore red flags or smoking guns during due diligence: resolve them.
  7. 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.
  8. push the deal process ahead, avoid long pauses = money lost/spent. Set & follow deadlines.  Follow-up.
  9. 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.
  10. Keep lists, revise it often, details are everything.