Why would someone sell me their perfectly good business?
Often individuals who want to buy a business are skeptical about why someone would sell a good business. There is an all too frequent buyer attitude that says:
"If it is a good business why would they want to sell it?"
Here are some reasons we get from company owners who choose to sell a business:
1. Divorce of husband and wife owners
2. Partnership disputes
3. Owner health issues
4. Kids don't want the business
5. The business has gotten bigger than the skills of the owner
6. The business needs professional management
7. The industry is changing faster than the owner wants to change (in this case the owner is always convinced the market is wrong and he is right).
8. The business needs investment to continue to grow but the current owner is unwilling to make the investment.
Now for the bad reasons: There are also business owners who would like a buyer to buy their business because it's not a good business and they'd be very happy to let someone buy it. Is buying a bad business a bad investment? Not necessarily, there are many bad businesses that can be fixed quickly and can be very successful for a new owner. If you see a bad business for sale that you believe you can fix then the question becomes price. Paying a fair price for a good business makes sense and paying a low price for a bad business sometimes also makes sense.
The key factor? Due Diligence. Do your due diligence to make sure you know what you're buying. Get professional assistance from advisors who represent you. You will spend some money for a CPA and Attorney but it might save you from a big expensive mistake. If you are dealing with a business broker or business brokerage firm they should make it very clear who they represent and it's almost always the seller, not the buyer.
Do your homework; sometimes the best business to buy is the business that initially looks terrible. If there is a well run business selling for $500,000 and doesn't need fixing up is it a better buy than a bad business in a similar industry that can be bought for $300,000 and fixed up with another $100,000? It all depends on your accurate assessment of the opportunity and your skills.
Buying a business can be a very rewarding process both emotionally and financially but it needs to be done with eyes wide open and a willingness to dig a little to see if the opportunity is right for your specific situation.
"If it is a good business why would they want to sell it?"
Here are some reasons we get from company owners who choose to sell a business:
1. Divorce of husband and wife owners
2. Partnership disputes
3. Owner health issues
4. Kids don't want the business
5. The business has gotten bigger than the skills of the owner
6. The business needs professional management
7. The industry is changing faster than the owner wants to change (in this case the owner is always convinced the market is wrong and he is right).
8. The business needs investment to continue to grow but the current owner is unwilling to make the investment.
Now for the bad reasons: There are also business owners who would like a buyer to buy their business because it's not a good business and they'd be very happy to let someone buy it. Is buying a bad business a bad investment? Not necessarily, there are many bad businesses that can be fixed quickly and can be very successful for a new owner. If you see a bad business for sale that you believe you can fix then the question becomes price. Paying a fair price for a good business makes sense and paying a low price for a bad business sometimes also makes sense.
The key factor? Due Diligence. Do your due diligence to make sure you know what you're buying. Get professional assistance from advisors who represent you. You will spend some money for a CPA and Attorney but it might save you from a big expensive mistake. If you are dealing with a business broker or business brokerage firm they should make it very clear who they represent and it's almost always the seller, not the buyer.
Do your homework; sometimes the best business to buy is the business that initially looks terrible. If there is a well run business selling for $500,000 and doesn't need fixing up is it a better buy than a bad business in a similar industry that can be bought for $300,000 and fixed up with another $100,000? It all depends on your accurate assessment of the opportunity and your skills.
Buying a business can be a very rewarding process both emotionally and financially but it needs to be done with eyes wide open and a willingness to dig a little to see if the opportunity is right for your specific situation.
