Why You Should Consider Buying From a Retiring Entrepreneur
You could waste your time seeking out the next Facebook or Uber. But the more successful path often involves taking over an existing successful business. Now is one of the best times to consider this potentially lucrative option.
Why it’s a Great Time to Buy
Aging Baby Boomers have created a tsunami of businesses about to be put up for sale. Over the next two decades, retiring owners will bequeath or sell at least $10 trillion worth of assets and more than 10 million businesses. Seventy percent of these businesses will be sold, presenting a major opportunity to entrepreneurs.
It might not be as exciting as buying the next start-up, but buying a decades-old well-run business is a sound investment that often requires much less effort. Here are eight tips for those considering taking over an existing business:
Do Your Research
What sort of business do you hope to own? If you already own a business, is there room for synergies with a business you hope to take over? Do you have a professional edge? Learn as much as you can about the industry under consideration. Attend trade shows. Speak to customers and research potential competitors.
Connect With Industry Insiders
Sure, you can find business listings online. But the most useful leads typically come from industry contacts, including brokers and advisors. Recruit a pool of experts, including lawyers and accountants, who can both advise you and connect you to interested owners.
Do Your Due Diligence
You must know exactly what you are buying. Thoroughly review all business records with the assistance of a knowledgeable team of advisors. Don’t take the seller’s word for anything. Ensure everything is supported with a clear paper trail.
Get to Know the Industry
You should know what your competitors’ first move will likely be, and what the next big thing is that your customers seek. You need to understand the market, including forces such as oversaturation. Take a hard look at the industry before you get involved. Consider also whether clients will stay with you, or jump ship when the current owner leaves. Customer loyalty can be a fickle thing.
Find Ways to Add Value
Even with a highly successful business, there are myriad ways to add value. While you don’t want to make changes when you first take over, explore options for moving a business into a new market for greater profitability and a meaningful return on your investment.
Find Ways to Work With the Owner
Many owners want to know that someone with similar values is purchasing their life’s work. Cultural fit also matters for the current managers and staff. So find an owner with whom you work well, and develop a strong relationship that can ease any growing pains following the sale.
Be Patient During Closing
Closing won’t happen overnight. It’s a process, and one that demands patience. A skilled team of advisors can help you navigate closing.
Create a 100-Day Plan
You should know what you plan to do as you transition the business to new ownership. This clear vision can set expectations for stakeholders, and ensure that those first few months really count. Get expert assistance, and consider working with the current owner to get her suggestions to grow the business.