M&A Thoughts:  Should You Buy A Business?

Many Americans are becoming their own Business Owners for lots of different reasons.  I see many people who look to start their own unique Business.  However, many of them might be better served buying into an existing Business.  This is true whether it is a stand-alone Business or part of a Franchise.  The goal of purchasing the Business is that there will be Systems, Products and Services already in place.  The new Owner can put their mark on the Business, but they do not have to start from Ground Zero.

There are plenty of problems to overcome still with Business Purchase.  One obvious one is that there is money needed to fund the purchase.  You may have noticed my series on "Financing Your Business".  There are plenty of good tips and paths forward to make such a deal work.  The two most obvious paths are an SBA (Small Business Association) Loan and Seller Financing.  These can be combined to make an effective deal.  An SBA Loan is a Loan with a percentage of Government Guarantee.  Seller Financing is the Business Seller financing the deal and will be paid with the Cash Flow of the Business.

A big part of both Financing Options is the need for an effective Business Plan.  This includes a description of the Business, some Key Elements about the Business, and a Financial Projection.  My experience is that most people can get through the Mission, Vision and Values.  They tend to struggle a bit more when it comes to Market Sizing and Positioning.  They completely lock-up when it comes to creating Financial Projections.  These are all required for a good Business Plan.  One other thing is required.  That the Results of the Business are compared to the Plan Regularly and the Plan is updated periodically.  Without that, the Business Plan is work thrown in a drawer and adds no value to the Business.

One of the other hurdles is Due Diligence.  This is the work to be done to evaluate the Company.  Again, there is a section surrounding the Business and its Operations.  Financials need to be reviewed as well.  Finally, all the Contracts must be looked at and understood.  All of this is true whether this is a Franchise or a Stand-alone Business.

All of these areas are places where I can help.  So if you are thinking about buying a Business, then give me a call!

Jim Sackman
Focal Point Business Coaching
Business Coaching, Leadership Training, Sales Training, Strategic Planning

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