1. Buy a business you like. This is key, says Ed Pendarvis, president and founder of Sunbelt. If you don't enjoy what you're doing, you won't do it well. "I always advise people, 'let's try to find a business you like,'" he says. "You usually won't buy a house you don't like, or a car you don't like, or marry a woman you don't like. You're going to be working eight, 10, 12 hours a day there, sometimes six or seven days a week." So, you'd better enjoy it.
2. Be flexible. Sunbelt advises its clients to be open to all sorts of businesses. Don't lock yourself into a McDonald's or a Mail Boxes, Etc. Who knows, you may surprise yourself by taking a liking to a Blimpie or a Signs Now franchise.
3. Don't expect much financial info. Think the current owner is going to let you peruse his books? Don't bet on it. Chances are that you'll only get a peek at the company's income tax returns, documents which often don't show a complete picture of a company's financial state. "Most of the financials are done with the intent of minimizing taxes, to not show profits," points out Pendarvis.
4. Consider chemistry. This may seem like an unusual recommendation, but Sunbelt tells its clients to forget about buying a business if they don't like the current owner. The buying process is a long and somewhat complicated one - it's imperative that the buyer and seller work through it together.
5. Go with owner financing. This is often a given, since banks don't like to finance business sales. "Bank financing normally doesn't work because unlike a house loan, where the house stands for the security, a business doesn't have adequate security," says Pendarvis. "The bank can't run the business, can't manage the business."
6. Don't pay cash. You may not want a loan over your head, but don't pay all cash for a business - even if you have it. You should keep a stash on hand for emergencies and business improvements.
7. Make an offer. Once you've seen all the financial and business records, and decided that you like the business, make an offer. Waiting longer only delays the negotiating process, which will reveal even more information about the company. And don't worry - an offer doesn't commit you.
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