How to buy a business that’s not for sale

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For many entrepreneurs, the dream begins with bootstrapping a business from the ground up and ends in glory. But starting from scratch isn’t without its challenges – finding customers, hiring staff and getting the cash flowing can be tough without the support of an established brand.

By contrast, buying an existing business can be a less risky venture altogether. Choose wisely and you can move into a business that’s already generating profits from existing customers, benefiting from a ready-made reputation and a troupe of employees who know the business inside out. No need to reinvent the wheel – just follow a tried-and-tested formula and look for ways in which you can add even more value. And, while it’s often a costlier route, you’ll find it’s always easier to secure financing on a business with a proven track record.

But what if you can’t find a business you want to buy in a sector or geographical area that suits you? Do you plump for the self-start path or just sit back and cool your heels until the right proposition comes along?

Dig deeper

The good news is that you don’t have to wait for something to happen – you can choose to take a more proactive path. First, think long and hard about the type(s) of business that most interest you and where they should be located (if location is an issue). Consider your own skills and experience and the size of business you want – making sure it matches the confines of your budget. Then, simply investigate every business in the area that matches your criteria, whether or not it’s listed for sale.

Get networking

While internet listings and classified business-for-sale newspaper ads are a good place to start, don’t be limited by what you think is available. Consider placing a prominent advert of your own in the local paper’s ‘Want to Buy’ section and start networking with any business contacts you have in the area, making sure everyone knows you’re in the market to buy. It may be worth joining networking groups – or attending Chamber of Trade events – just to put your feelers out.

Calculate a valuation

Once you’ve identified a prospect, you can consider value. Obviously, if a business hasn’t been listed for sale, it can be hard to estimate its value so you know whether or not you can afford it. Again, a broker or property agent might be able to help you with a ballpark value or you can look at the price that other similar businesses have sold for in the area to give you a guide. Consider this estimated value against the amount you have available, then draft your pitch.

Make a direct approach

The direct approach may work in your favour, especially if you catch a business owner who’s in the early stages of considering whether to market their business for sale. You can simply write a letter detailing your wish to buy the business or use an intermediary to do this for you – a local agent or broker may agree to be your go-between for a fee. Whichever approach you favour, it’s a good idea to prepare a buyer ‘CV’, detailing the reason for your interest, your experience and background, as well as an idea of available budget. This will show that you’re serious about your pitch.

Expect rejection

While your pitch may be greeted with enthusiasm, it’s important not to get put off by the rejections that are the inevitable flipside of making a direct approach. Your bid may be dismissed outright or simply ignored. If it’s the latter, you can always wait a bit and follow up; even if you get a straightforward ‘no’, you can respond by leaving dialogue open should they change their mind. If the pitch is rejected because the price is too low, you always have the option of negotiating, should you be willing to spend more.

Sometimes, it can simply be an issue of timing: your approach may be welcomed one day when – had you made the same pitch a month earlier – it would have been dismissed out of hand. Get your timing right and you could bag yourself a bargain. 




Posted on March 29, 2019 | buying, buying a business, for sale, tips

By bizdaq

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