Most buyers don’t realize that only 20% of all business buyers are successful in buying a small California business. As a consultant I talk to buyers on the phone daily and the frustrations I hear from them are usually pretty much the same.
Buyers need to know how the game works when buying a business. It is a lot like finding that great job – it takes a lot of work and patience. Most business buyers are unprepared, unrealistic, and think they will easily find that perfect business. If you are thinking of buying a California business you need to carefully read and follow the points below to be successful.
To successfully buy a California business you need to:
1. Have a one page “Acquisition Criteria/Resume” ready at all times - this info consists of the types of businesses you are looking to purchase, what geographic areas you want to buy in, what amount you have for a down payment, how much adjusted net income you expect from the business you are buying i.e. return etc. Make sure you have your name, address, all phone numbers to be contacted at, email address, and fax number at the top – and get this out to all business brokers, owner/sellers, and agents you speak with.
2. You need to understand as a buyer that 70% of all California business brokers and agents don’t cooperate with each other on their business for sale listings – the reasons vary – but you need to know this when you go searching. Searching for a business to buy is not like looking for a house to purchase (or residential real estate). You need to contact many brokers and agents who may be selling the types of business you are looking for and send/fax/email them your “Acquisition Resume” and stay in touch with them on a consistent basis.
3. Take confidentiality agreements seriously. If you are going in with someone else to buy a business (like a partner) make sure you both sign and get it back to the broker or owner immediately – don’t expect much information about the business without signing one. Keep all info about businesses you look at confidential – you break the pact on one of these and business brokers will never show you another business (and there are legal ramifications in many instances)!
4. Never ever tell a business broker or agent these things: “Don’t worry I have plenty of money for a down payment/to buy a business – it’s none of your business”, “I’ll look at all businesses for sale and areas – I am not picky” – when brokers and agents hear these items and other nonsense from buyers they know you’re not a great prospect and will usually pass on you. It comes down to supply and demand. There are more buyers than sellers now in the California marketplace and it only takes one buyer to buy a business. Be open, truthful, and communicative with business brokers, owner/sellers and agents – it will pay off.
5. Make sure you are on the Email Alert program at www.bizben.com/emailalerts.php - this system will email to you any new, revised, and featured listings that match your search criteria on a daily basis. Listings in demand and priced appropriately (along with realistic deal structures) usually sell quickly – you want to know what comes on the market for sale and act on it pronto.
6. Be prepared financially by getting pre-approved/reviewed for financing (SBA etc.) ASAP and make sure you have your down payment liquid and ready to go. Have all the forms completed ready to go – Personal Financial Statement, Management/Resume Form etc. I can’t tell you how many times I talk with buyers and how they were aced out of a deal since they weren’t ready financially (i.e. they had to wait and pull the equity out of their home for the down payment, get their information together etc.)! Go get Pre-Qualified for SBA financing and for more information on this topic go to: www.BizBuyFinancing.com
7. Go ahead and make offers on businesses that interest you! Pull the trigger! Buyers who hold back, never make up their minds on deals are the ones who never buy. There are contingencies in purchase agreements that protect you. Making an offer on a business usually locks out other buyers while you can do your due diligence.
8. Select your team of advisors – CPA/Accountant for due diligence, attorney for assistance with contracts, financing sources, etc be ready with these professionals now so you don’t kill time looking for them while the seller selects another buyer since you weren’t ready to go! |
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Peter Siegel, MBA - BizBen Founder, Author, Consultant
Peter Siegel, MBA is the founder and President of BizBen.com - Businesses For Sale In California. A nationally recognized author (3 books and a syndicated small business blog) and expert consultant (national SBA small business specialist) on selling and buying businesses, he provides professional assistance to business brokers, agents, and business owners in getting maximum response in their advertising & marketing efforts in regards to selling small to mid-sized businesses. If you are selling a business and need professional assistance utilizing high performance advertising, marketing, and highly effective strategies, or individual customization with your BizBen Power Search options in buying a California business, you can reach him at 866-270-6278.
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