Your Buying Tips
» Know what is critical to your process of buying a business before you begin looking.
It is easy to be enchanted with a business for sale in Santa Fe. Knowing your criteria for making a selection is critical. Here are a few examples I used for a recent business purchase:
- Is the business financially viable, now and looking forward?
- Can I see the next generation of the business, knowing where I might take it?
- Is it a business I can be proud of and want to work at?
- Will I enjoy and have the skills necessary to ensure the success of the business?
- Will the business support the work-life balance I want?
» Do due diligence after you sign a buy-sell agreement.
Due diligence is the process of evaluating whether the business for sale in Santa Fe or Northern New Mexico is what it is presented as. Do the clients exist and how faithful have they been in paying. Is the net income, owner take, what is presented. Are the expenses claimed reality and can you maintain them? What has the track record for performance been over a number of years, at least the most recent two years? Due diligence usually covers:
- Financial health
- Historical performance
- Quality of the output
- Legal challenges
- Environmental, internal and external, challenges
- Forecasting performance based on what is found
Turn around specialists are those who buy a bad business but know in advance what they are buying, cut the right deal, and know they have the resources to bring quickly enough to reverse the downturn. Not everyone can be.
» Know yourself and your interest and capabilities to be first an entrepreneur and specifically with this business.
Not everyone is cut out to run his or her own business. While the risk may be equally difficult in other income earning environments, often people who are successful as employees doing the same kind of work may not be successful or happy as a business owner, particularly if they have put up their life’s savings as part of the purchase. If you hate widgets and buy a company that makes widgets, you are likely to not like owning a business that makes widgets. Perhaps knowing to walk away will help you ensure your success.
» Don’t do a deal without professionals around you.
Business brokers, attorneys, financial advisors all have a critical role in protecting you from a mistake. Expert valuation, legal documents, financial recommendations for the structure of the sale and general advice are all important to having a transaction that benefits you. To assume you know may cost you in a deal gone bad, limit your financial potential, or land you in court. Professionals protect your interest.
» Choose carefully your financier.
It is very common for a number of financial sources to be put together to facilitate the transaction. For your own contribution, don’t deplete your resources beyond reasonable. Leave yourself with a nest egg and a sum of money you might tap for the unforeseen. The current owner, the seller, is usually a wise selection for financing. Having their vested interest in the future performance ensures they properly turn the business over to you and meet commitments to help. They are often a less expensive financing means. Professional lenders such as banks and venture capitalists are additional sources for financing with venture capitalists wanting more interest, faster return, and more input to the company operation. While these venture capitalists may seem too controlling, wisely selected, they can bring a big asset to achieving success.
» Buying assets, not liabilities, at least those you can not support, is a best position.
In small business sales, most recommend asset only purchases (excluding accounts receivable.) Sometimes this is not possible. Therefore using your advisors will help to keep you from assuming the liabilities that are not appropriate for you to assume, e.g. unpaid taxes.
» Only buy a business from someone who is willing to sign a non-compete.
Without their non-compete, the selling business owner can totally eradicate your newly purchased livelihood. Have your legal advisor ensure this is a part of the agreements you sign. Length of non-compete, business scope, and geography are all critical components of non-competes.
» Defining your business purpose, mission
Know what you are. Are you the manufacturer of small statues or are you an expert bronze pourer? Is your market the city, the country the world? It makes a big difference in how you plan, stage your growth, develop your relationships, who you hire, etc. Don’t think about today, think about where you are going to be in, perhaps, ten years..
» Have a business plan–including
- Marketing–how you let your market know what you do and how you do it
- Finances–where you are going to find and spend resources
- Staff–those who are going to do your business, as employees or contractors
- Services/products–what you are doing
- Service Area–where you are going to do it
Some have said that in today’s fast environment a two year plan is all you can responsibly do. But, whether you look out one year or fifty years, look both long and short. Looking forward is very important to drive you to meet obstacles and advantage opportunities. Adjust along the way.
» Industry Knowledge
Follow what others are doing in the industry and be willing to share what you know. This group think will help the industry and help you.
An ethical operations will gain you a positive reputation, one that will help you to ensure a solid place in the marketplace. Once someone is found to be unethical, it is hard to regain a positive position. There will always be folks questioning what you do. Plus working within the law means you will not be caught owing penalties, ones that might be levied on estimates they make rather than facts.
Look ahead to where you want to be and how you are going to get there. This is both a financial and a product/service exercise. It will help you to be prepared, ensure there is enough cash for everything you need and help you be ready for market changes.
» Employees vs No Employees
Your financial position is better with independent contractors, not employees. Knowing the laws about employees and following them will keep you from large penalties and past due taxes.
» Best Selling
Promote your business on its attributes, what sets you apart. Don’t put down the competitor as it reflects negatively on you, suggests you can’t find enough good about your product to sell it. Positive relationships sell. Developing positive relationships can take a long time–don’t stop developing them.
» Record keeping
Routinely keep tidy records. Reconstruction is difficult. Messy records make your various required tax filings and ultimate sale of the business very difficult. Knowing where you stand today helps you know where you are going tomorrow. Knowing where you have been helps you have a successful business for sale in the future.
The best you can sell is great quality at the right price. Don’t short change your efforts to improve and never think you have the best it can be.
» Community Knowledge & Involvement
Be part of your community. Sure it is a nice thing to do but ultimately it is building your relationships that result in more and better business. First know what your community is–local, national, international.
Contact us for you buying needs – 505-466-4744 Or by email.