If you are thinking about buying an already existing business, then the information in this article can save you a lot of time, money and frustration.
Listen to this:
A little while back I was talking to a guy who knows how to analyze and value businesses.
And he started telling me why it is such a mistake to buy any business that is advertised or listed with a business broker.
“Why is that?” I asked. I had never heard this before. In fact, I had always been told you MUST buy businesses through a broker. And that doing so was the easiest and safest way to go.
“Because, unless the owner is simply retiring and wants to cash out, there is usually a more sinister reason why they are selling,” he replied.
“What do you mean?”
“Well, would you sell your business right now?”
I thought about that a moment and it became clear what he was getting at.
People don’t usually sell good businesses.
I know I wouldn’t sell mine right now…unless it started causing me undo stress or it was going so well I could “cash out” for tens of millions of dollars.
Unfortunately, with most businesses for sale, it’s usually not a retirement issue…it’s a stress or some other problem issue.
And if you simply analyze the numbers, the financial statements and the sales…it will usually be clear as a bell what the “real” reason the owner is selling is — whether good or bad.
And that was my friend’s point.
If you are going to buy a business you must do two things:
1.) Learn how to analyze a business or find someone who does.
2.) Be very skeptical of anything that is for sale or listed by a broker.
In fact, the best businesses to buy are the ones not for sale.
The ones where the owner hasn’t thought about selling…because everything is going well. But who, at the same time, would still be very interested if someone approached him with a letter or phone call making a lucrative offer.
Keep these simple facts in mind when you are looking to buy a business and you will save yourself a lot of money, time and hassle.