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Navigating the Business for Sale Market
Navigating the Business for Sale Market
Beginning your search for a business opportunity always feels like a positive decision, but a first encounter with the market can seem like a daunting experience.
There is usually jargon to decipher, professionals to consult and a raft of procedural and legal documentation to engage with.
So, if you’re about to enter what can sometimes seem like a business minefield, here are some tips to help you navigate.
What are you looking for?
The first step is to decide which particular business sector you want to invest in.
Here, you will be guided by your own interests and inclinations, as well as your skills, aptitudes and experience of the business world.
In addition, you will also need to carefully research the future prospects for your chosen market sector (including publications such as trade magazines) in order to be sure any acquisition is likely to be profitable. At this stage you should pay attention to any proposed legal changes and to the strength of any local competition.
Any business vendor will also take a view on the ideal profile a potential buyer should be able to offer.
So not only should you choose a business you can be sure you have a passion for, you must also consider what qualities a new entrant to that field would be expected to possess. After all, existing owners will always favour someone who can clearly be trusted to build and nurture their business, staff and customers once they have left.
What should a good business look like?
Having researched some broad sector knowledge, you should now be much better informed and ready to find a specific business for sale which fulfils your search criteria.
While a business must be in good order from an economic perspective, it must also be a good fit for your personal situation. That generally means deciding what ideal budget, size, location and annual turnover you have in mind.
And importantly, make sure your expectations are realistic: Yes, you can haggle down a business valuation, but don’t rely on this tactic as a means of securing a drastic reduction within your budget.
Your best strategy will always be to know your upper budget limit and prioritise a business in good shape above a larger acquisition, which may look good on paper but might not produce the returns you will want to see.
How can you put yourself in pole position?
Having chosen a business, it’s a common misconception that you can simply 'add to basket', check-out and pay.
Procedurally speaking, your due diligence team will want to assess the suitability of the business and its actual worth in relation to the seller’s valuation. Such information will enable you to be ready to ask all the right questions about the financial records of the business and the performance and executive elements of the day-to-day running of the enterprise.
Just diving head first into negotiations will never help your cause. So, as well as protecting your interests, a measured approach will also help to verify your credentials; as an informed, enthusiastic and serious buyer who will stand out as a significant asset to the company’s future progress.
And likewise, having your own purchase finance in place will send a similarly positive message about your suitability and intentions as you move towards the final phase of negotiations.
As a prospective buyer, you should know your own mind, understand the sector and ensure that, with the help of your team, you really understand the potential of the business you wish to buy.
You will then be able to put yourself in an excellent position to establish a trustful relationship with the vendor, and negotiate a good deal to meet both of your objectives.
By Jo Thornley, Head of Brand and Partnerships at Dynamis.
Joining in 2005 to co-ordinate PR and communications and produce editorial across all business brands. She earned her spurs managing the communications strategy and now creates and develops partnerships between BusinessesForSale.com, FranchiseSales.com and PropertySales.com and likeminded companies.