According to a recent buyer survey, 60% of online business buyers reported that they “Understood the buying process”, but many of our conversations with SBDC counselors paint a different picture. Our workshop at the ASBDC conference aimed to address the complexities of the buying process and shed insight into buyer expectations to better prepare SBDC centers as they intake aspiring entrepreneurs.
Read our 6 steps to buying a small business that were presented at the conference, and click here , or any of the following links to download our Buyer Tools referenced below.
1. Determine Readiness to Purchase
Are your clients prepared to take on the task of running a business? Consider your client’s income, lifestyle, investment, and risk profile to see if they’re suited for the task.
In gauging client readiness, you might ask:
- What do they like/not like to do?
- What are their strongest skills? Weaknesses?
- What work schedule and environment do they like/not like?
- What is my Risk vs. Reward Profile?
2. Help Find the Right Business Type
With the large number of available businesses for sale, it’s no wonder that the selection process can become overwhelming. In evaluating options, consider whether or not the business fits their criteria. Include your client’s experience, interest, price range and long-term goals in the equation. Buyer Tools #2 and #3 can help.
3. Create the Right Financing Package
As you’ve seen, adequate financing is a major stumbling block to closing a business-for-sale transaction. Between tapping into personal savings, loan options, or seller financing, there are pros and cons to explore for each. As soon as the buyer contacts a business seller or broker, the seller/broker will want to be sure that the buyer is qualified to close a transaction before sharing any information about the business.
Help your client understand their financing options by doing a quick assessment of their current economic situation. Visit our Buyer Tool #4: The Purchase Price & Financing Source Relationship
4. Help Assemble a Team of Experts
Your client already knew to seek advisement by enlisting the services of the SBDC, and now you can help them fill in the services where they’re needed. We advocate Appraisers, Business Brokers, Accountants and Lawyers in addition to SBDC counselors to help aspiring entrepreneurs complete all of the tasks required to purchase a business. Each expert brings different value to the table and will be helpful to create a smooth close.
In helping to evaluate local professionals offering the above services, use this matrix as an example of choosing the right expert for the job: Visit our Buyer Tool #5: Broker Evaluation Matrix
5. Narrow Down the Choices
Evaluate each business against specific criteria to help your clients choose wisely. Determine key evaluation elements such as location, purchase price, financing, cash flow, and lifestyle ramifications. Help your client set measurement criteria (Buyer Tool #6 provides an example), but try not to be too analytical while assessing against targets. On the same token, it’s also important to remind your clients to remain objective and not get too emotionally attached to any one opportunity. Visit our Buyer Tool #6: Business Evaluation (Example)
6. Close the Deal
Help your client understand what all they need to do as part of the buying process. From making an offer to conducting due diligence to closing the deal, you can assist your client with each step along the way. To help your client determine an appropriate asking price for a business of interest, be sure to access BizBuySell’s valuation product (FREE for SBDC counselors) which shows you comparables based on over 50,000 closed business transactions and 45,000 current businesses for sale, which can be filtered by geography, business category, revenue and net income.
About BizBuySell: BizBuySell is the Internet’s largest and most heavily trafficked business for sale marketplace, with more business for sale listings, more unique users, and more search activity than any other service. BizBuySell also has one of the largest databases of sale comparables for recently sold businesses and one of the industry’s leading franchise directories.