How to Buy a Business.

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I just like sharing brilliant ideas and creative write-ups i come across. I really love this;

Have you ever thought of buying a business but you don’t know how to go about it? Do you want to learn how to buy an existing business with no money down? If yes, then i advice you read on.

Acquisition is the new strategy on board. Many successful entrepreneurs have expanded or gone into business using the acquisition model and the upcoming entrepreneurs are now following the same path. Most entrepreneurs now would rather resort to buying an already established small business than building one from scratch.

“I was vehemently against acquisitions. Now let’s buy everything in sight. Well, that’s a slight exaggeration. We are a little more strategic than that. But everything was on sale.” – Larry Ellison

Many business titans and corporate managers are now including acquisitions as part of their company’s growth and expansion strategy because acquisition is an effective way to enter a new market terrain without starting from scratch.
Does buying a small business catch your fancy? Do you have access to funds and you have your eyes on some small businesses in your vicinity? Then sit back as i unleash some intelligent steps to follow to avoid getting your fingers burnt.

How to Buy a Business Successfully – The Ultimate Guide

“Everyone thought the acquisition strategy was extremely risky because no one had ever done it successfully. In other words, it was innovative.” – Larry Ellison

1. Prepare yourself to go through the acquisition process
Before you think of buying a small business, let me warn you ahead of time that the process associated with acquisitions; which is similar to the entrepreneurial process can be very stressful. It takes a lot of calculations, strategizing, commitment and discipline to successfully buy a business. Be it a small business or a big one.
Another important issue to deal is your skills as an entrepreneur. How smart are you when it comes to dealing with business affairs? Before ever engaging in an acquisition, especially if you are on the buying side; you need to hone your entrepreneurial skills and one of such skills is the art of negotiation. Mastering the art of negotiation is very important to your success as a business owner.

“If you cannot negotiate, you will end up getting good deals at exorbitant prices or worse still, you will get nothing.” – Ajaero Tony Martins

2. Assemble a strategic business team
The first advisable step to buying a small business is to assemble your own strategic team. This team should not necessarily be those at the helm of affairs of your business. The process of buying a business is quite tedious, so it’s advisable you leave out some members of your business team. They will see to the smooth continuous running of your existing business (if any).
The team you are about to assemble should be charged with the responsibility of bringing your acquisition plan into reality. As an entrepreneur, it’s your responsibility to assemble an excellent internal working team, as well as an external team of advisors.
Your internal team will be made up of representatives from your finance, marketing, strategic planning and operations department. The internal team members should be creative and aggressive. They should focus on the core fundamentals that drive the acquisition strategy such as distribution, integration and expansion of the customer base.
As for your external acquisition team; it’s going to include experienced external advisors such as attorneys, accountants, investment bankers, valuation experts, insurance experts and employee benefit experts. Most importantly, your external team should include your business coach or mentor, who should also be well experienced in the acquisition game.
3. Carry out feasibility on businesses of your interest
After assembling a strategic business team, the next step to take is to carry out a feasibility study on the proposed businesses of your choice. Please note that your team should also be involved in this process.
A rule of thumb in the acquisition process is this: do not select a company and hope you can acquire it for nothing; it’s the same as saying “don’t carry all your eggs in one basket.
If it’s your goal to buy a company, then you have to select at least five businesses based on certain strict determined factors and begin work on them. Only this way will you be able to buy a business at an excellent price.
4. Work out a compensation plan for your external advisory team
As the entrepreneur leading the entire acquisition team, it is your duty to plot a compensation plan for your external team. You can work out the compensation modalities with your internal team. Compensations for external advisors are usually based on an agreed percentage of the total price of the business acquired.
5. Develop a strong acquisition plan

“It is better to buy a wonderful company at a fair price than to buy a fair company at a wonderful price.” – Warren Buffett

This is where all the acquisition strategies and plan is plotted. Different industries require different approach and strategy. This is the point where the following questions needs to be answered:

• Is your team considering a hostile takeover?
• What is going to be the long term impact of the acquisition on your company?
• How does your team intend to finance the acquisition?
• Have you developed a contingency plan just in case things go the other way?

These are few of the questions you are suppose to answer in the process of developing your acquisition plan.
6. Make your offers known to the proposed sellers
Before making an offer to the proposed sellers, make sure the above five steps have been thoroughly settled. If you recall, i said earlier that if you intend buying a company, you should pick at least five businesses of your interest and this is my reason for making such statement.
When you send out acquisition proposal to the company you intend buying, there is every possibility that your proposal will be thrown back at you. This is always expected except the company to be acquired is already on sale.
When making your offer known to the seller, make sure you do so professionally and if eventually a meeting is scheduled between you and the proposed seller, make sure you know your objectives before entering the meeting venue.
If you are not a good negotiator, then let a capable member of your team do the talking while you observe the prevailing atmosphere logically.
7. Strike the deal
Just as i stated somewhere above, you should have a contingency plan just in case things don’t go your way. But if the reverse is the case, then you will definitely end up striking the deal.
Acquisition is really a boring process with loads of paper work and series of meetings. If things go your way, then strike the deal and move on but if not, fall back to your contingency plan and focus on the next company at hand.

“I think you might see us growing much deeper into banking. You might see us acquiring companies in the banking area. You might see us acquiring companies in the retail area. I think you might see us acquiring companies in the telecommunications. I think you will see us getting stronger in business intelligence.” – Larry Ellison

As a final note, i know most entrepreneurs reading this will say they have no intention of buying a business because they either lack the guts or the capital to do it. Anyway; for those who desire to go through the acquisition process, i wish you all the best.

Credit to :  Ajaero Tony Martins