It’s understandable that many people think that all they need to do is to use a business broker to search for a business and then engage an accountant and lawyer to assist them with the financial and legal details involved with buying a business. These buyers consider this group as their team of advisors and look no further.
While these groups certainly play a role in the process, the intelligent business buyer understands that the scope of what they have to do to be successful goes far beyond these three professional groups.
The two biggest areas buyers underestimate and which almost always leads to their failure (by either never completing a deal or by buying the wrong business) is first when it comes to educating themselves and second, in their analysis/investigation of the business itself.
The good news is there are a ton of helpful resources available. As it relates to the investigation/analysis of a business, a buyer has to go beyond the business itself and look into the industry, the customers, the marketplace and the competition to name a few.
Whenever I have bought a business, I always look to find someone who has been successful in the industry and can provide some consulting expertise. For example, if you’re looking to buy a medical distribution business, wouldn’t it be helpful to have someone who has already owned one to provide you with additional insight? You can easily find these individuals through trade associations or by contacting owners of businesses who are not competitors to the one you’re considering. Surprisingly, most people are eager to help (and of course offer to pay them). Having someone with direct industry experience is a huge asset and their know-how will be far more helpful than relying on any broker, attorney or accountant.
Getting back to trade associations, nearly every industry has one. Visit their website – they typically have tons of articles and additional resources. Call the association President. Without disclosing the name or exact location of the business you are considering, tell them your plans and ask: “How can your organization help me?” Remember, the sole objective of these groups is to help its members. They will assist you with additional information, resources and contacts.
I have always used this exact strategy in the eleven businesses I have purchased and the countless others I have analyzed, and it has always proved to be an enormous help.
Next, prospective business buyers, and especially those who have never bought a business before, grossly underestimate how much is involved and how much they need to know about buying a business. It’s not a simple purchase. While the Internet is crammed with articles about various aspects of buying a business, it’s easy to spend hours searching the Net trying to pick up tidbits of information. A lot of this content is useful and much of it isn’t; it’s too simple and generic in nature. To this end, don’t fool yourself – if you don’t have a wealth of experience buying businesses, arm yourself with as much knowledge as possible. Invest the time and yes, a bit of money, and get yourself educated. I’m not trying to give you a shameless sales pitch to buy one of the complete guides our company publishes on buying a business, there are other materials available as well, but get hold of something.
When it comes to buying a business and making a financial and lifestyle investment of this magnitude, the more knowledge and available expertise you have, the more likely you’ll be to make the right decision.