With the New Year comes new opportunities to grow both personally and financially. If you’ve been thinking about buying a business for some time, 2019 is the perfect year to finally set a plan in motion. However, between deciding on the right business type, screening sellers, and negotiating on a price, the timeline to becoming a business owner can take years.
A recent broker survey showed that 32 percent of brokers claimed it took one year to get a business off the market and 11.3 percent claimed it took 18 months. If that timeline is longer than you’d prefer, the following advice is right for you. Below are helpful and strategic guidelines to buying a business by Labor Day of 2019.
Make Key Decisions Early
Before reaching out to professionals or scouting business listings, it’s important to make a few key decisions about what you want to buy. Changing your mind on aspects like price later on will only extend the buying process and drag your timeline out further. To successfully buy a business in a short period time, it’s important to think through a few factors first.
Price: Identify your top number and stick to it. An accountant and business broker can help you anticipate asking prices and ongoing costs later, but for right now it’s only crucial that you can confidently draw a line in the sand when necessary.
Location: Any business owner will tell you that location is everything. Depending on your potential business, location alone will determine important aspects like foot traffic and brand awareness. Scout different regions and locations until you decide on a few that pique your interest. It’s helpful to have more than one area in mind, but also important that you’re not casting too wide of a net.
Industry: Maybe you already know what industry you’re interested in, maybe you don’t. If not, do your research on how different industries are performing right now. Also, take into consideration what you will enjoy doing and what you have experience to handle. If you dislike working with food, don’t force yourself into owning a restaurant.
Assemble a Team
It’s entirely possible to buy a business by yourself. However, necessary steps like negotiating, contacting sellers, and evaluating a company’s financial statements requires substantial preexisting knowledge and time. If you’re wanting to buy a business by Labor Day, you’re going to need an experienced team of professionals who can navigate these waters effortlessly.
Broker: From prescreening sellers and evaluating goodwill to negotiating a fair asking price and handling paperwork, a broker will streamline the entire buying process for you. While they normally charge a 10 percent commission, the saved time and (likely) lower asking price will make it a worthwhile investment.
Accountant: To accurately evaluate the current success of a prospective business, you’ll need an accountant. An accountant will ensure all their financial statements, tax returns, and sales records look healthy enough to warrant an offer. Plus, an accountant will help you determine a legitimate budget range, acquire a loan, and prepare you for any ongoing costs of your new business such as taxes, compensation, or monthly overhead.
Attorney: Ensuring a prospective business is up to date with licensing and permits is crucial before taking over. An attorney will not only evaluate any paperwork throughout the process, but will also verify that the business you’re buying is fully up to code from a legal perspective.
Do Your Due Diligence
While your team will handle a bulk of time-consuming steps, it’s still important that you do your due diligence upfront, as to avoid any surprises towards the end of the process which may put you back at square one.
Once you have a seller in mind and conversations have started, don’t hesitate to reach out to customers, vendors, and employees about their experience with the business. They’ll likely have valuable insight on what is and isn’t working within the business, providing you with ample opportunity to notice any red flags or important selling points.
Buying a business in under nine months can seem overwhelming, but with the right support structure and strategies you should be able to call yourself a business owner by the end of 2019.