Acquiring a business for sale can be a great thing for you. It is a little bit tricky but worth the worth. More than ever persons are now understanding the importance of business and are moving towards it. But for everyone, it may not be that simple.
Maybe you don’t have the funds, the connections, or the world-changing vision to get ideas like Tesla, Amazon, or SpaceX off the ground.
You can find companies about to double, triple, or ten times their value in one year. It won’t be easy to find a real estate investment or stock option that will give you that kind of return.
Over the past decade, I have bought multi-million-dollar businesses in this way and taught others to do the same. It works so well that I am also creating an investment fund to support these types of operations. Why teach others to do it? Simple. This gives me access to a source of offers that I would not have otherwise.
Identify what you want.
The best opportunities are small businesses that make between $ 1 million and $ 10 million per year. There are different kinds of business models but try to look for simple models of business. The business models with less competition, like professional services, have a higher success rate. But the best industry is the one that suits your interests and background.
Find motivated sellers.
Finding business owners who want to keep going and are motivated to sell is essential.
Calculate this simple calculation.
Offer to sign a nondisclosure agreement so that the business owner is comfortable sharing his books with you. Confirm that more money is coming in than going out and that cash flow has been constant for three years. Then make sure the earnings are enough to cover the cost of the financing.
In addition to profitability, determine if the company has opportunities for improvement, especially if it is weak in an area in which you are good. Often, you can double your profits simply by improving marketing or operations, for example.
Connect with the business owner
Always make the direct contact with the business owner do not rely on brookers.
Finance the transaction, sometimes at little or no cost.
Many financing options do not require your capital and none. If the owner is motivated to keep going, he can often buy a high-potential business next to nothing. Some business owners will allow you to repay them over time using the profits of the business. If they want to be paid in advance, you can get a loan from a financial institution specializing in acquisitions. Banks can use corporate profits as collateral; they are less interested in your credit and, more importantly, they want to see that you have a mask in the game.
Dive into due diligence.
Once you’ve accepted an offer, it’s time to do your due diligence. Consult with accountants and attorneys and negotiate a contingent fee structure at closing. That way, they are not motivated to the bill as many hours as possible.
Talk openly with key employees to understand how the business works and make sure they don’t plan to leave when the deal closes. Develop a solid succession plan with a manager who is thoroughly familiar with the industry.
Take advantage of the business owner during the transition.
Now you must hold everyone accountable, with a clear process that you can execute. The business owner knows exactly how everything and everyone works, so trust him during the transition. They are generally motivated to help you succeed but consider scheduling a transfer period to ensure that they stay long enough to pass on their knowledge.
Congratulations! You own an established and profitable business.