Buying a business – especially for the first time and leaving your existing career can be unnerving, to say the least, but it can also be the most rewarding challenge you will ever experience.
Gino Wickman in his book Entrepreneurial Leap addresses concerns new business buyers face in making the leap to self-employment. Many new buyers don’t realize the grit it takes to make the transition.
Gino’s book will help you find the answers to difficult questions such as do you have what it takes to be an entrepreneur, is it worth it, and how do you go about doing it.
My Story
I’ve personally owned and operated more than one business in my lifetime. I was working for large corporations in a variety of positions and finally had ENOUGH. I no longer wanted a JOB, nor did I feel satisfied, and appreciated. All of my efforts were greatly benefitting the corporations I worked for while only a small portion of the proceeds went to me for my efforts.
I felt as though I really didn’t have control of my financial future and the amount of free time I was allowed to enjoy working for others. I also loathed being someone I wasn’t in order to fit in and climb the corporate ladder. I also detested the posturing game that was normal behavior in the company.
I also realized I wasn’t getting any younger and I had saved up for a cash injection on a business acquisition. It was time to explore business opportunities so I could create – everything. My own culture, processes, and systems, products and services, customer and employee satisfaction, etc. I could do it how and when I wanted to.
I worked with a Business Broker and acquired my first business. I hired a CPA, went online and applied for a Federal Tax Identification Number, set up a business entity (corporate structure), and registered my business entity with the Colorado Secretary of State.
During and after my training period, I experienced many trials and tribulations but I was able to successfully sell my businesses and continue in my entrepreneurial journey even today. I must say, for me, it sure beats “working for the man.”
I have started up businesses from scratch and through acquisition. I believe acquiring an existing business that has a solid name, website, customer/employee/vendor base, processes and systems, training, etc. is a much better start than starting from scratch.
Buying a Business
The start-up odds for success are really stacked up against you versus buying an existing going concern that has a proven track record.
Before you buy a business, you need to know what you’re getting yourself into, and you must understand how to properly evaluate the return on your investment and avoid making large mistakes with improper due diligence. An experienced Business Broker can help you avoid costly mistakes.
Besides learning about the financial condition of the business, you must have a thorough understanding of the intangible as well as tangible assets of the business.
If there is property involved in the sale, or if you as a buyer will be leasing the space, there are important ramifications to help set you up for success.
Some of the basic steps in a business acquisition involve:
- Signing the Non-Disclosure Agreement
- Analyzing the Information Memorandum or Confidential Buyer Review
- Speaking with the Seller and other advisors
- Meeting the Seller and touring the business
- Analyzing the financials (P&Ls, Balance Sheets, and tax returns)
- Creating and presenting the Letter of Intent
- Choosing a lender and advisory team (business transaction attorney, CPA, financial advisor, etc.)
- Performing proper due diligence
Due Diligence
During the due diligence process, you as a Buyer will want to review the corporate records, learn of any impending lawsuits, communications, etc.
There may be important vendor, customer, or employee contracts, securities issuances, and stockholder information that must be understood and addressed.
Understanding the management team and employee base and how likely they are to stick around is extremely important.
There may also be intellectual property rights, licensure issues, etc. to contend with that could make or break you as a new business owner.
As you can see, there is much more than meets the eye in buying a business so it’s critical that you as a buyer have proper representation to help ensure your success as an entrepreneur.
If you would like to discuss the nuances of buying a business in more detail, reach out to me personally at [email protected] or call direct (720) 436-1472.