Dig into your reason for wanting to buy a business
It’s important to understand the why behind your decision to buy a business. One way to do this is to identify your motivations. A few common motivations include:
Financial motivations – If you are thinking of purchasing a business to become more financially independent, you may want to find a business with a solid track record of growth and profitability.
Lifestyle motivations – Depending on the lifestyle you want to have/maintain can help you determine the size and type of business you opt for. It can also help you determine your involvement, whether you want to be very involved in the business you purchase or take on a more passive role. Those who prioritize work/life balance will typically take on a more passive role.
Passion and Purpose – Is there a particular industry or niche that you are passionate about? Will buying a business in that industry or niche help fulfill a lifelong dream of yours? Buying a business that aligns with your passion and purpose can significantly increase the chances of success.
Skillset – Do you have a set of skills that you believe would help you excel in a specific business? Selecting a business that aligns with your strengths and expertise can help simplify the transition process and improve the likelihood of success.
Clarify and Categorize your Search Criteria
Once you have determined the why, it’s time to determine the what. It’s crucial to know exactly what you are looking for in a business to buy to reduce the risk of choosing one that doesn’t check all your boxes. You need to clearly outline your criteria by defining the size and type of the business you want to buy. Asking yourself the following questions can help:
Size Related Questions
- Do I prefer a startup, a growing business, or an established enterprise? Startups and growing businesses are typically smaller in size.
- How many employees am I prepared to manage? The more employees, the larger the business.
- What is my budget for acquiring a business? Larger businesses require more capital.
- Do I want a business with a large customer base? A large customer base suggests the business is large.
- How integrated do I want the business to be? If a business is involved in everything from production to sales, it’s most likely a large business.
Type Related Questions
- Do I want a franchise or an independent business?
- Am I looking for a business with a physical location, online presence only, or both?
- Do I have a preference in terms of customer base or target market?
- What geographical market/location am I targeting?
- What kind of organizational culture/values am I looking for?
Another factor to consider is capital. Do you have the means to buy a business in full or would you require a vendor take-back? A vendor take-back is a financial arrangement where the seller of the business “takes back” a portion of the selling price in the form of a loan. A vendor take-back works best in situations where the buyer is not able to get an approved loan from the bank.
Another valuable tip for a business buyer is to be flexible with your search. Flexibility doesn’t mean compromising on your core goals. Instead, it’s about being adaptive.
Be Open To Unexpected Prospects
Explore all the opportunities to better understand the nuances of the market you are stepping into. Even if a specific business initially does not seem like a good fit, further research might reveal it to be a suitable match.
Don’t Be Afraid To Adjust Your Strategy
Alternatively, as you do your due diligence, you may come across new information of the business that was not clear before. Flexibility means adjusting your strategy to see if this business is still a good fit before making snap judgements or rejecting the opportunity outright.
If you are looking for a business which requires a high degree of involvement where you would be overlooking day-to-day activities, you may consider relocating. Although, moving might be more than just a logistical change but also a lifestyle change. It can be difficult adjusting to a new community or understanding the dynamics of a new market. In that case, consider relocating the business. However, this decision comes with its own set of challenges such as cost of relocation and risk of losing potential clients. On the flip side, it can also open the business up to fresh markets, reduce operations costs depending on area of relocation, and improve your work-life balance.
Know When to Ask for Help
Navigating the complexities of buying a business can be overwhelming, especially if you’re unfamiliar with the Canadian business landscape. Consider enlisting the help of professionals such as business brokers, lawyers, and accountants. A business broker can provide valuable insights into available businesses for sale and help facilitate the transaction process. Legal and financial experts can ensure the acquisition is conducted smoothly, adhering to all legal and regulatory requirements.
A lawyer helps review/draft non-disclosure agreements, purchase agreements, lease transfers, and other important documents. Lawyers will also help with due diligence and closing the deal.
An accountant will help with financial due diligence and financial forecasting by reviewing financial statements, outstanding debts, and tax returns. They also educate the buyer on tax implications and the best way to structure the deal.
Depending on how big the purchase is, you might need a team. It’s also important to work with a group of professionals you work well with to avoid potential pitfalls.
The Robbinex team are experts in securing and preparing viable business opportunities for sale.
Our ISO 9001-2015 certified process ensures each business has passed through Robbinex’s preliminary due diligence process, all businesses presented are bona fide opportunities, and that owners are emotionally and financially ready to sell.
View our buy a business page to view our latest listings.