Industry stats tell us that 9 out of 10 people who start the search process of buying a business never actually complete a transaction.
The desire is there, perhaps even the finances are in place, yet so many fall before they even reach the first hurdle.
Perhaps the primary reason this statistic is so heavily geared toward giving up on the process, is that most people simply don’t understand just how much is involved.
Given that most are first-time buyers with very little grasp on quite how extensive and exhausting the process can be, they can quickly become discouraged and overwhelmed before ultimately, abandoning the idea altogether.
Buying a business is such a significant event in both your business and personal life that you must be properly prepared and informed so that you can make the best possible decisions throughout the process.
Be patient, but set yourself a definitive timeline
It is widely recognised that the average buyer spends anywhere between 18 months and 2 years searching for that ‘perfect opportunity’ before, in most cases, calling time on the process. It’s a huge decision and you should rightly be fastidious and measured in your approach, but there’s absolutely no reason why this process shouldn’t take half that time to complete.
Do your research
If you are a first-time buyer, educating yourself on the process and understanding some of the challenges you may face will be critical to a successful acquisition. You may think your accountant/ solicitor or business coach/advisor will be able to make some of the decisions for you, and in some cases, you’d be right to think that, but ultimately this is a process that will have a monumental effect on your life and so you should take full ownership of it. There’s no denying having real quality advice from these professionals, as well as a good business broker you feel comfortable with, will help to ensure a successful transaction, but this is your vehicle, and you need to drive it.
Set off on the right foot
You’ve decided to acquire a business, now it’s time to go find that utopian opportunity. Over 70% of acquisition searches start online, and after just a few minutes spent on Google, you may well be astonished at just how many business acquisition opportunities there are in the UK. To say there are thousands of opportunities would be conservative. With these kinds of volumes, it really can turn into an endless search. This is where your timeline and preparation come in. A blanket search of a plethora of business for sale listings is likely to be time-consuming and at the very best, speculative. Try to identify the type of business you are looking for early on and target your focus accordingly. Many won’t know the kind of business that’s right for them and that’s fine, sometimes it’s best to start by ruling out those opportunities that categorically aren’t a good fit for your requirements. Your finances will also determine the opportunities that are within your remit, so it’s perhaps paramount that you only focus on those that make sound financial sense from an investment perspective.
Getting your finances in order
A personal financial statement will be required from you at some stage in the process, as well as listing your assets and liabilities and detailing your net worth.
It’s important you have your credentials in order and available as early as possible. It’s just good practice to be organised and prepared, isn’t it?
How much am I prepared to invest?
Around 80% of SME purchases involve seller financing, which generally works out to be around 30 to 50% of the purchase price. If you have £50,000 to invest, opportunities that are listed at £1,000,000 shouldn’t be on your radar. It’s ok to ‘think big’, but it’s important to remain pragmatic. Be clear on exactly how much of your cash you are prepared to invest. If you’ve received assurances of financial backing from family or peers, appreciate that when it’s time to take the plunge they might not be so forthcoming. There are a host of loans and schemes available from financial providers that you might find of use, with the right financial advice you can turn your business aspirations into reality.
Do I enlist the help of a business broker or go it alone?
In truth, there are many instances in life where ‘going it alone’ is the best course of action. If you’re a first-time buyer, in fact even if you have completed several acquisitions, this probably isn’t one of them. Having an experienced and knowledgeable ‘partner’ to handhold you through what is at times a complex and daunting process is invaluable. Not only will they likely provide access to a database of suitable businesses for sale, but they will also be able to guide you through the valuation process and help you circumnavigate any potential stumbling blocks that could scupper a deal. Even if you’ve done extensive research and feel fully prepared for the process, things often do and will crop up that you hadn’t considered or prepared for. Having a Business Broker that understands your situation and knows your requirements intimately will mean you can let them worry about these details whilst you remain focused on the bigger picture and most importantly, with as little stress as possible.
Consider the wider implications on your loved ones and family
This is perhaps the most overlooked factor when you begin the long and laborious journey into business acquisition. Owning a business can and probably will take up a huge amount of your time and commitment. It may be that you are expanding an existing business by acquisition, and long hours and weekends filled with meetings and menial business tasks are already the norms, but whichever way you cut it, any acquisition will have a significant impact on your personal life. Your wife/husband or partner must be on board and behind you every step of the way, their support will be vital. Whether your family has a vested interest in the business or not, it will affect them perhaps just as great as it will you.
This blog is by no means an extensive guide to business acquisition, but rather a condensed and digestible look at the kind of things you need to consider if you are thinking of buying a business.
There’s no doubt that business ownership can be one of the most life-changing and inspiring paths you can pursue but proceed with caution.
If you need any advice or further information on making a business acquisition, selling your own business, or indeed financing an acquisition, feel free to give us a call on 0118 338 1444 to speak to one of our consultants. We look forward to speaking with you.