Written by David Muise | Photography by Jennifer Grace
Buying a business
In many ways, buying a business will be the most important and consequential purchase you will ever make. It will impact everything in your life, from family to finances, and all the emotions that come with each. It’s not for everyone, but it’s possible there has never been a better time to do it than now. Resources are plentiful. The internet age provides entrepreneurs for all sorts of entry points for access to capital. So, despite the obstacles, if you are driven and passionate about the work, you can do this!
A pertinent guidepost for entrepreneurs wanting to buy a business is Start With Why, Simon Sinek’s wildly popular book about inspiration. Before you make any moves, Sinek advises that you examine your own motives, weaknesses, strengths, capabilities, and even your own psychology.
Kurk Lalemand, of Next Level Business Coaching in Auburn, asks, “There’s some things to tick off, right? Do you have a passion for the business? Do you easily take ‘no’ for an answer? Are you competitive? Are you a self-starter?”
Lalemand allows us to further understand this checklist by asking us to consider an overarching concept he calls “diversion thinking versus conversion thinking.”
“A conversion thinker answers questions and approaches problems in sort of a linear fashion, almost the way you would find answers in school,” explains Lalemand, “while a diversion thinker sees maybe three or four different solutions to every problem. It’s almost like a West Point soldier versus a guerrilla soldier. A guerrilla soldier knows there are many moving parts and stealthily works his or her way through the challenges as they come, while also seeing alternative paths.”
This ability to identify a variety of outcomes and paths to success is a defining characteristic of an entrepreneur. The diversion thinker will also use their skills in interpersonal matters as Lalemand explains.
“Are you a strong ‘people person’?” posits Lalemand. “Are you able to develop emotional intelligence that will help you understand where people are coming from and, further, how you’re coming across?”
These will be key factors in how you deal with both your customers and your employees. If you are at all tentative about the questions Lalemand poses, don’t give up; rather, work at self-improvement. Lalemand also recommends identifying the gaps in your skill set and finding key employees to help fill them in.
Choosing the right business
It may seem natural to choose a business with which you are familiar, and many times familiarity will benefit you.
“But,” advises Scott Balfour, owner of Magnusson Balfour Commercial and Business Brokers in Portland, “don’t pigeonhole yourself. You might find that, once you’ve identified your skills, you can easily transfer them to another industry.”
There are three basic tasks any business owner will need to do well: be able to sell, hire the right people, and manage their money. What Balfour is saying above is that if you are a great salesperson, you can probably sell in any number of different markets.
“You might consider looking for a business that is operating and succeeding, yet lacking in the very skill set you bring to the table,” advises Balfour.
Conversely, the right business for you might be sitting directly under your nose.
“If you’re, say, at the manager level and you are making recommendations that are not being taken, maybe try to buy the business from your boss,” says Lalemand. “And, it’s not at all uncommon to approach someone whose business isn’t for sale. Be tactful and start a private conversation, based on your attraction to the business.”
Balfour recommends digging into the internet’s largest “business for sale” website BizBuySell.com. There are currently over 200 Maine businesses listed there. As you look through these businesses, consider your strengths and think about how you could improve upon any of these companies for sale.
Lalemand endorses this sentiment. “A good opportunity is always a business that is operating but is run shoddily. Consider buying that business, if you know you can run it better.”
Both Balfour and Lalemand offered some insight into some hot industry types that should be on your radar.
“Open a trades business,” says Lalemand. “Have you tried to get a plumber or an electrician recently? The existing cadre is aging and there just aren’t many people stepping in to take their place.”
Balfour adds to this. “Service businesses are attractive. And manufacturing is always hot in Maine. There are certain industries where government and banking help is more available.”
Pulling the trigger
Both Lalemand and Balfour suggest connecting yourself to good resources during the buying process. And each of them provides valuable services for those ready to buy a business. Balfour’s new book, Buying and Selling a Business: An Entrepreneur’s Guide- From Preparation to Closing is a must-read, and Lalemand’s coaching services are something you might choose to seek out when readying yourself for a purchase.
You are going to have to sit down and have a conversation with your banker. Lalemand recommends beginning with hypothetical questions like, “What type of credit line would I need for- fill in the blank- business?”
You will also need to consider funding. Balfour says that, “the Small Business Administration requires 10 percent down but, if you can manage 20 percent, that generally leads to a more comfortable position and a better deal.”
When initiating these conversations with your bank, get some documents together as this will give you a leg up on the process.
- two to three years of personal tax returns
- two to three years of tax returns from the business you hope to buy
- personal financial statement
- credit report
- lease agreement, if that exists
- a business plan
Once a purchase agreement is settled upon, you will quickly want to begin thinking about some key aspects for hitting the ground running, says Lalemand.
“Get focused on your tasks: selling, hiring the right people, and effectively managing your money. These will be the three most important things you will do for your new business,” advises Lalemand. “And start exit planning. Your exit strategy begins the day you buy your business.”
Next Level Business Coaching
146 Main Street, Auburn