Buying a Small Business - Part 2 Approaching the Business Owner –
Once you've found a business that you would consider buying, you need to consider how to approach the owner(s), particularly if the business is not overtly for sale. Consider the seller’s state of affairs – age, health, and health of spouse, presence of heirs, and other interests. If the owner has heirs that would continue the business, your efforts are probably better spent elsewhere. If this continuity is not apparent, the sale of the business may simply be a matter of time.
Web sites may yield information on major projects (key customers) and likely suppliers (brand names used). Sometimes they may even state the company’s market share in certain segments. By contacting the company’s customers and suppliers (it may require a personal visit) you may learn something of the company’s reputation, reliability and owner situation. Whether you choose to indicate that you seek to purchase a business, or whether you act as though you are already in the business (a ruse) seeking to buy similar products/services, is a personal preference. Talking to the company’s chief salesman can often yield a great deal of information.
Try to find the answer to questions like:
Company reputation, relative strengths and weaknesses vis-à-vis competition.
What are the owner’s special skills - outside of administration, leadership, and decision-making ability - that you may need to learn in order to operate the business successfully?
Would you (as a co-owner) be able to make a real contribution to the business (in marketing and sales, product development, etc)?
What is the family situation, re: children or siblings, and ownership structure; owner’s age?
What are the owner’s interests outside the business?
Would he/she like to spend time traveling or otherwise have time to enjoy some of their success?
Might the owner consider a shared ownership situation, with you assuming more of the responsibilities over time?
What are the owner’s options (vis-à-vis you), should you convince him/her that it is time to sell?
One of the goals of a small business owner is to maximize the payback he/she can realize when the business is eventually sold. If there is no obvious continuity upon owner retirement, and the owner is over 55, he/she may be receptive to an immediate buyout or a phased buyout offer that would allow him/her a continued role in the company. If the owner is 45- 55, AND you have skills that would add to the business in a sales/engineering/manufacturing/management capacity, he/she might be receptive to a deal that would allow you to take a minority position with an option to buy, based on some agreed-upon formula. The obvious advantage of this approach is that you learn the strengths and weaknesses of this particular business.
A third-party introduction may be preferred (through a customer or supplier), but if you can’t develop one, don’t be afraid to approach the owner directly. Because insurance, investment and business brokers often approach small-business owners, you must distinguish yourself from them. If the secretary is too shielding of the owner, call for an appointment after or before hours. Be up front – tell the owner you are interested in discussing continuity of the business ownership (phased-in or eventual purchase) AND the personal contribution you can make to the business. You may face a lot of rejection – but then, you only need one success to reach your goal. The downside is that you might develop a job offer in a business that is attractive to you.
If the relationship is to be a long one (as opposed to an immediate buyout), it is imperative that you have good chemistry - that indefinable, ethereal rapport – with the owner, and that there Is a mutual feeling of trust. You must project an image to the owner of competence, so that he/she would be comfortable with you running the business in his/her absence.
Remember to continue your search even though you have identified one to pursue. Having options gives you a greater chance of success.
Planning your purchase strategy requires in-depth thinking and planning. Consider attending a free counseling session at SCORE’s office (call 551-4301) and a business-planning workshop given by SCORE during October:
Creating a Winning Business Plan
Evans National bank
One Grimsby Drive
Hamburg, NY 14075
Wednesday, October 11, 2006 – 8:30AM – 1:30 PM - $35 includes Business Planning Guide
You will receive a 55 page SCORE “Business Planning Guide & Financial Formats for All Small Businesses” booklet plus expert detailed instructions on how to complete each page for your business.
Starting and Managing Your Business
Lackawana Public Library
560 Ridge Road
Lackawanna, NY 14218
Wednesday, October 18, 2006; 8:30AM – 4:30PM - $25 includes coffee and donuts
This workshop is a must for new business startups to learn all the elements of business management required for success. It is also very helpful for those in business that may be experiencing problems, or want to fine-tune their business for greater efficiency and success.
You will learn about marketing research, marketing, business planning, insurance, federal and state taxes, legal structures, government resources, financing, counseling and more. Representatives from the private sector, SCORE, and government agencies will make presentations. SCORE members will be available for counseling if desired.
JUST PRINT AND BRING THIS E-MAIL WITH YOU TO THE WORKSHOP AND GET $5.00 OFF THE PRICE OF THE WORKSHOP.
All SBA funded programs are extended to the public on a nondiscriminatory basis. |
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