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How to buy a Business?
Where does one look for businesses for sale? I have a strong technical background so am not looking for retail, but something in manufacturing or computers. I am just curious where does one typically see these advertised? Here is my ideal scenario and tell me what is wrong:
Owner has a profitable business for sale but is moving on to more profitable endeavours so wants to sell. He would be willing to mentor the new owner for a year at no charge. After a year he would sell it to you and bill you his time as a consulant would.
Is that how it typically works? I cant imagine buying a business without some period of free mentoring, no?
Very seldom does anyone sell a profitable business. Rather, they would hire a manger, and run it like an ATM or cash machine. If you had a business that ran by itself, and dumped money into your checking account each month, would put an end
Most often, the business is in trouble, and the owner wants out. The new owner has to find a way to turn around the business, and pay off the loans to the former owner.
The biggest problem with buying a business is the price. A sound profitable business is going to be very expensive because you have to pay up front for some fraction of the sum total of the future earnings. Even a small business can be priced high if there is real estate, inventory, equipment, or a franchise involved. What you want to avoid is buying a job. You can get a job anywhere. With a business, you need to earn a reasonable rate of return in addition to your salary.
One does not look for businesses for sale, one goes out and finds profitable businesses that are not for sale and convinces the owner to sell. Your best bet is finding a profitable company founded at least 15 years ago by an individual who is currently over 55 years of age. Typically, such an owner is successful, but burned out and grossly underdiversified. Your purchase offer allows him to walk away with a large lump sum, dump it into mutual funds and proceed to enjoying a well-earned retirement.
Get a copy of a book by Lionel Haines titled "How to Buy a Good Business with Little or None of Your Own Money"; it's been out of print for a while, so you'll have to search through used book dealers. There are some useful tips in it.