Buying a business takes time and planning. Just as it would be sensible to pre-map a road trip through unfamiliar territory, it would be practical for a first-time buyer to develop a plan to navigate the path to business ownership. Charting the route is key to buying a business and becoming your own boss.

If you try to look at every business opportunity out there, you would be spinning your wheels and getting nowhere. You need to establish your own weeding-out process in order to streamline the course towards business ownership, rather than taking a circuitous route with too many detours.

Here are six (6) milestones to achieve before embarking on your trip to the business-for-sale marketplace.

1) Begin with a self-assessment: Critique the reasons why you want to buy a business. Summarize the types of work activities you enjoy and what type of lifestyle you want to pursue. For example,
  • Do you want to be an Absentee Owner or run the business yourself? Do you intend to operate the business with a manager? This may be important to you if you have a limited amount of time available to personally operate the business. Not all businesses lend themselves to absentee-ownership conditions.
  • Do you want to manage a staff or prefer non-labor intensive? Do you consider yourself a people person? Some people shun or fear taking management responsibilities. Are you comfortable with, and enjoy, supervising and motivating others?
  • How important is perceived status of the business? Is it important that you own a business that has a name, product, service or asset base which will project a certain image? Or, would you be happy with an unpretentious business as long as it was profitable and met all of your other requirements?
  • Do you require time freedom or have issues about the kinds of hours involved in the business you choose? Is it important that you own a business which allows you to come and go as you please? Or, would you be satisfied with a business that required fixed hours?
  • Will your family be involved? Is it important that you own a business where you can employ other family members? Are you wanting to create a certain number of jobs for your family members or close friends? Do your family members really have the needed skills and qualifications to help you succeed with the business? Are they willing to make the same sacrifices you are making
  • Does it matter if the business has travel requirements?
  • Do you want a business in which you would need some or a substantial amount of training? Are you willing to learn new skills, new business buzz words, new techniques and procedures? Or, do you prefer a business be one in which you are already quite knowledgeable and experienced?
  • Is it important that your business not require your personal involvement on weekends? If so, does the business have dependable employees capable of handling weekend operations without your supervision?
  • Are you a morning or night person? Do you like to retire early in the evening and wake up early in the morning? How important is it to you that the demands of the business not disrupt your present life style?
2) Draft a personal financial statement - Outline your assets and liabilities. Take an inventory of your financial resources. You should identify the actual availability of all financial resources in the following categories:

  • Actual liquid funds (cash) available for a down payment.
  • Actual liquid funds (cash) on reserve for transition expenses, start up costs, working capital, business charges, learning curve.
  • Current sources of income that are expected to continue into the future
  • Anticipated funds to be received in the future
  • Unencumbered assets available as collateral, notes receivable which could be factored, real estate
  • Other sources of financing including business partners, relatives, friends
  • Retirement funds such as 401K and pension funds that qualify for tax free benefits
3) Establish monetary expectations - Determine your minimum income requirements and your goal for future earnings. Your financial criteria will help narrow the field of businesses that can meet your expectations. Here are a few points to consider:

  • Do you need a fixed amount of earnings every month from the business?
  • Do you need to pull money out immediately or can you wait six months or a year before making any withdrawals?
  • How much importance do you place on high growth or expansion? Do you want a business that has full potential to grow and continue expanding into the future? Or, would you be satisfied to maintain a business at its current level of operation?
4) Update your resume - Accurately highlight your skills, work experience and extent of business knowledge. It can be extremely useful in enabling a business broker to suggest acquisition candidates that may be suitable to your background. Sellers and lenders want buyers with qualifications that will help insure the continued success of the business. You're actually selling yourself to the current owner, the lender and the professionals that represent them.

5) Define the parameters of your search - what industries, geographic area and transaction size will you consider. Past work experience, education, hobbies, interests, talents, and skills are a good source of inspiration for the types of businesses you might enjoy and in which you may have some knowledge. Once you understand your financial capacity for a down payment, you will have a better understanding of the transaction size you should consider. Business Brokers can explain the possible price ranges that would work for you.

6) Assemble a team of advisors - Let your professional advisors, such as your attorney, accountant, and financial planner, know you are looking for a business. Contact a business broker / intermediary who represents businesses within your targeted market.

Making a business acquisition is a team effort, and your business broker is the quarterback. If you are interested in buying an existing business, representing yourself as serious, qualified, and motivated is sure to drive your effort to successful business ownership......the whole reason for the trip!