How To Buy a Business
You want to be in business but most new businesses fail. Fact. If you've realised that the best way of reducing the risk is to buy a going concern with a history demonstrating profits, you're already ahead of the game.
Buying does involve a larger capital investment, that's true, but there are several ways to skin the financing cat. Not having adequate funds to make the purchase is rarely a deal breaker (sellers often finance the purchase by taking a "note" or deferred payment).
The tricky part is finding the right enterprise, doing the due diligence, valuing the business, negotiating with the seller, navigating around all the hurdles such an exercise usually presents and completing the transaction in a safe and satisfactory manner.
To that end you can be guided by a business broker or your government's local small business advisor. There is no substitute, however, for being fully informed yourself as no business transfer agent, advisor or other party will take ultimate responsibility for the safety of your investment.
There are several good books on the subject but, as regular readers of this site will know, I'm a great believer in free information. We've got a lot of material on due diligence, valuations, choosing an escrow company and even on finding business brokers.
So in that spirit of free, I've picked out the books I most recommend and... provided links for you to read them gratis. For those of you who must have a printed copy, click on the affiliate buy now link but, when you get to Amazon don't forget to read the small print. See the image to the right here? Yes, this $111.02 book is available for $0.01. You can't get much closer to free than that.
The top recommendation is Richard Parker's Guide:
How to Buy A Good Business At a Great Price
Richard has a huge wealth of experience at the coal-face buying businesses. He writes in an easy to understand style and provides invaluable advice and many unique insights into business buying. He writes for and advises various organisations including one of the world's biggest business-for-sale listing companies, Bizquest; actively buys businesses himself; is a faculty at the Donald Trump university and a general all-round great guy. He has consulted with me on some of his content ... and that's good enough reason to trust him :-)
This book is available in print format, downloadable pdf and CD-ROM, and the best part is that he provides a lot of free information in the extracts and articles on his site. Every purchase also comes with unlimited free consulting with the man himself!
Upstart Guide to Buying, Valuing and Selling Your Business (Scott
Gabehart, Dearborn Financial Publishing): An excellent book on the "how
to" of valuation, due diligence, financing and the whole ins and outs of
business buying. Amusing and informative. Not too much of information and
not too little, very user-friendly. Definitely the place to start (and
finish... unless you're looking at very large, multi-million dollar
businesses). Includes a detailed glossary and various reference material.
buy the book at Amazon for about $110 but what we like best is that
read it for free at Google books before you decide whether it's worth
the money. We think it is.
The Complete Guide to Buying a Business (with CD ROM) (Fred Steingold
Attorney, NOLO), is a pretty good read for beginners and comes complete
with a CDROM, forms, spreadsheets to analyse the financials, sample
documentation like sales and security agreements, confidentiality letters
etc. But it's a bit weak on business valuation and financing and often
refers you to other works by the same publisher. F.S. Attorney is the
author of several other books on running small businesses.
Strategies for Successfully Buying or Selling a Business (Russell L. Brown, Business Book Press) is one of several business buying and selling related books and tools available from this publisher. What's interesting is that their site provides several articles and extracts from the books that are really worth reading such as their 12 Laws of the Business Buying and Selling Jungle, Financing the Business Acquisition, So You Think You Want To Buy A Business, Finding the Right Business to Buy and others. You don't need to make a purchase to benefit from a lot of good information.