I work with a lot of sellers and buyers of small to medium sized businesses in the North San Francisco Bay Area. Most potential buyers do not succeed in buying a business, largely because that lack a systematic approach. A few weeks ago a high-net-worth individual asked for my advice on acquiring a business, and my reply was along the lines of the following.
A simple five step plan that can help you target and invest in a business:
1. Evaluate yourself. Why do you want to own a business? Are you an empire builder or are you looking for a lifestyle business? How will the business impact your personal and family life? Are you a risk taker or do you prefer a steady salary?
2. Identify your expectations. How much income do you need to generate? How much time are you willing to devote to the business?
3. Assess your financial and professional capabilities. How much are you willing to commit to the purchase and startup of a business. Will you require financing? Do you have a financial statement and tax returns that will gain the confidence of a bank or private lender? Does your work and educational background qualify you for the type of business you are seeking?
4. Target your business. Develop an acquisition search with a scope restricted to your targeted industry, size, location and price.
5. Develop a team. Involve your spouse or partner. Collaborate with your C.P.A. and attorney. Contact a business broker /M&A advisor who can identify available businesses that fit your parameters.
For further information or for help buying or selling a business, Don Ross can be reached at 707-778-0210.