Be a Competitive Business Buyer in 2021
By Andy Kocemba
While the current M&A market hasn’t quite reached the height and craziness of the residential home market in Minnesota, there are some similarities between the two situations. We are currently in a seller’s market, meaning there are more interested buyers than there are quality sellers. But, that doesn’t mean a buyer can’t find a great business to purchase. With the right preparation and focused effort, you can find and acquire the right business for you. Here are areas of focus to guide your search:
- Know what you want: Are you looking for a strong and healthy business or a distressed turnaround situation? In today’s market you can find both, but the differences will affect your approach to deal making. In a distressed situation, you can negotiate and look for a deal. But, if you are looking for a profitable and healthy business, be prepared to pay a premium price to win the deal.
- Know Your Numbers: Before you start your business search, work with your financial planner, banker, or CPA to get a strong understanding of what the ideal business deal is for you. What price can you afford? How much debt do you want to take on? How much money will you put down? How much income must a business produce to support your lifestyle? Winning a deal isn’t a win if the numbers don’t work for you. Having a firm understanding of your personal financial situation is crucial.
- Do Your Digging: In a world with so many buyers actively searching for a business to buy, you will need to be very plugged into what businesses are currently available and stay updated as new businesses are brought to the market. Make sure you are familiar with and active on the main listing websites, and be in regular contact with your local business brokers. After all, “the squeaky wheel gets the grease”. With an abundance of ready and willing buyers, simply sitting back waiting for a broker to bring you a deal is not an effective search strategy.
A Seller’s market is no excuse to give up on your business acquisition dream. There are businesses being sold, which means people are buying. To rise to the top of the buyer pool, follow the above tips to prepare, and then start your search!
- There are currently more interested buyers than businesses on the market. Sellers are able to ask for a premium price for a healthy business, but there are still deals to be found.
- If you are looking to buy a business, know your personal finance situation and what you can afford to offer.
- Take an active role in finding the ideal business to buy. Check listings, ask for what you want, and stay in regular contact with your business broker.