Four Keys to Buying a Worthwhile Business
Ted Leverette calls himself “the original business buyer advocate.” He has never been a broker. For the last 30 years he’s an author, speaker, and guide for people looking to purchase their own small to medium-sized business.
During this year’s inaugural #BossUp conference, he shared a few keys to help searchers find the right business and once they do, take full advantage of the opportunity.
Focus Your Search
You can’t buy the right business if you can’t find it. Leverette advises that you focus your search on mature, profitable, fairly priced businesses, with a sustainable competitive advantage.
Make a Memorable First Impression
You don’t get a second chance to make a first impression, Leverette quips. He explains that many of the best businesses for sale aren’t listed — they’re off-market deals. If you stumble on one of these opportunities, the seller is going to be qualifying you as a potential buyer from the moment they meet you. That means you need to demonstrate competence from your opening interaction.
But even if you’re not trying to get a potential seller to open up to you, being prepared matters. That means understanding the business and the industry, as well as the right questions to ask and when to ask them. Leverette advises steering clear of pitch decks — that go-to tool for private equity buyers — but he does recommend rehearsing the key talking points.
Beware of “Buyer Fever”
Leverette says that buyer competition is responsible for more bad deals than seller misrepresentation or lousy businesses. He explains that competition over an opportunity can lead to “buyer fever” which forces most searchers to expedite the process of evaluating a business and negotiating a deal.
“The most common mistakes that buyers make are errors of omission,” Leverette says, referencing things buyers fail to do rather than things they do wrong. “This is especially true when they want a business so badly they suspend common sense.” He added that the best antidote is information and experience. The former they can acquire through appropriate research and by hiring the right advisors.
Keep Moving Until Close
Leverette also points out that competition doesn’t just work to the seller’s advantage, it can also be used to the buyer’s advantage. On this point, he doesn’t mince words: “Unless they’re really stupid, (searchers and sellers) won’t sit on the sidelines.”
He says that savvy searchers always have at least two worthwhile deals pending. “Those of us who have been around have seen deals crater at escrow,” he adds, which means a buyer’s search should continue until closing and not a moment sooner.
You can watch Leverette’s full session here.
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